tv Politics Public Policy Today CSPAN December 14, 2012 2:00pm-8:00pm EST
it is embarrassing to compared government funding for amtrak with u.s. government funding for domestic aviation and highway speed passenger >> to build and maintain one of the best highways systems in the world, we've spent $114 billion and built it over 45 years and today it would be $126 billion. con jex on our roads are at historic levels and by 2020 urban interstates will be at or over capacity. and anyone who has had the pleasure of flying recently they know the problems that plag our nation's airport ch airports, in fact, in spite of all this amtrak carries more
riders from new york to boston than all other airlines put together. 50% of people that travel this distance. and between washington d.c. and new york city, amtrak carries twice as many passengers as all airlines come bind. today it carries 75% of inner city travel letters between new york and washington. amtrak has done all this with the threat of funding cuts and privatization especially of the profitable northeast corridor hanging over its head. we know that in other parts of the world privatization of high speed passenger rail has tried and failed to solve the problems it was intended to solve. these plans were almost always preceded by funding cuts, system i can safety and reliability problems caused a great deal of upheaval in the transportation and forced countries to renational lies a system. with that being said, we think that amtrak's long-term next
general plan for the northeast corridor provides a temp plate for a public private partnership that is worth discussing. if the partnership does not reduce the public interest or the interest of the brotherhood of lock motive engineers and other skilled workers. further they believe that amtrak should be the service prider for the northeast corridor and for the united states because they have provided progressive quality service despite many obstacles and continue to look for ways to increase train speed and reliability in service despite of these obstacles. thank you chairman. >> thank you and for all of you for your patience to exercise our constitutional responsibility and that's vote. we are back now. we'll turn to questions.
let me just comment to mr. tollman and welcome labor representing men and women that work for us. i appreciate your roll. i've said repeatedly and i wonder if people have a hearing disability and can't comprehend what i'm saying. i've always advocated the benefits, the wages, the retirement for amtrak employees in whatever structure we adopt making certain that's protected. i've also been here and watched the number of personnel from amtrak go from 29,000 to 19,000 and i say that doesn't pretend a bright future for labor either if you're the head of a union or labor organization or
a member. i've been there fighting for labor when labor had to fight amtrak and the federal government for benefits and wages. in fact, that was a prolonged and difficult experience for the people who worked for amtrak, those union members who were denied benefits and wages. and i als used the example of freight rail which gives better salary and better wages and reaches agreements without that type of poem significance. as far as my record, i have always supported the right of americans to join a labor union. when we wrote the tsa legislation, i insisted that we have that right. i also take the position that no one should be forced to join or compeled to join a union. but i think that's an important right and i think that labor
has done an incredible job over the years. there have been some problems here and there, but in raising the standards, the compensation and the working conditions for the people that get out there and roll up their sleeves and actually make things happen, rather than like congress just talk about it. so i want to make that clear. and as we move forward, i think that again, there are just unlimited possibilities. if we can have four time the number of passengers, i know we can increase the employment. we already actually tech nick cli, amtrak is a private corporation. it does have some governmental character sticks and certainly substantial government support. there have been debates about the level of support but
further more i've supported long distance service, a national system. but we want that to be operated and managed on the very bist basis because the chief underwriters of the private sector cooperation we have with am track in 1971 t main underwriters are the taxpayers of the united states. so that's all i've asked for. i think our goal is to have high speed rail in the northeast sordor. i think that's your goal, mr. tollman, correct? >> yes. >> we want to do that rather than in 30 years. 30 gleers my calculation brings the chart we'll put in the record without objection shows us not getting to high speed
operations until 2030 to 2040. at that junk chure i won't be around to see that given that my d.n.a. and longevity and as far as male members of my family are concerned. so my goal is to see it while i'm alive and not to have it happen after i'm pushing daisies out of some better set egg. but with those words and questions. we've got -- well, let me go to he had land first. i brought a caller: of conquering gothm. has everybody read this? >> will the staff please take
this and i'm going to ought graph it for him. let's see to joe, from john with love. [laughter] . >> if you think you're having problems, after you read this story of alexander's attempts to bring rail service into manhattan, the tunnels that he built, union station that he built. you think your politics have been tough, wait till you read this story. it's one of the most fascinating volumes i have ever read and it encapsulates all of the issues we're going through. he was determineed to do this. they were going to build ten or
12 rail lines. then people had to take a ferry from new jersey to new york. and his sister was an accomplished artist who had a studio in paris. during one of his visits he observed the french tunneling so he came back and said if the french could tunnel, we could too and adopted that plan. they actually failed. and you'll read that story too in this in trying to build a tunnel previous to that. but he did succeed. it's an incredible story of vision and just the type of determination to get the job done. will one of the staffers deliver that to mr. boardman. >> thank you. >> it does take that vision and it takes also the
determination. and also to be quite blunt, it takes the cash. now i was excited about president obama committing to high speed rail, however, i did express my disappointment in that the money was diverted among 150 projects. most of the money went to california for a true high speed rail. the rest is inner city enhanced passenger service and a number of other improvements and grants. for the fra representative and administrator, what is the intent of the administration for high speed rail in the future, the next four years? >> well, i think the president's vision is in his budget and it includes additional billions of dollars for high speed rail.
and so it is spelled out in his budget which he continues to be quite committed to it and we hope that the congress will follow through on that. >> well, mr. boardman, you started out with i think less than a hundred million and some of the money that came into the northeast corridor came in sort of i guess at the same time we designated the corridor high speed, which i commend you on doing. but secondly, with the return of money from at least florida, wisconsin and ohio. and mr. boardman, you're using that in some -- i don't mean this to be critical but it's sort of a band aid approach because you don't have the money but you're trying to pick project that is would make a major impact in improvements in the speed of that corridor. where are you on gate way as
far as funding, planning, expect cushion, where do you see it now and how much to get that done? and gate way maybe you could describe that for the record? >> gate way goes past new wark past pen station in new york. it proves two tunnels, some new tracks that go from basically lot enburg center to the new two tunnels and it includes space within pen station for new jersey transit trains that don't have the same ability as long island railroad does to stop quickly and store their trains in the hudson yards. >> where are you with that? >> we're in the planning stage. some projects could move quicker than others. we included that in the sandy
question in the $336 million. and we need to secure a space under the hudson yards. it's about an 800 foot section at about $190 million. once that real estate the development occurs it would close off the ability to get those two new tunnels n. the second thing we need to do that would be done under gateway is to raise to a platform or a different location that sub41 station that was flooded during the tunnel and also add high density signal systems on the east river tunnels, not so much to add capacity to the station, but to give us the ability to move trains through those east river tunnels more quickly and we could have restored the same level of service quickly had bebeen able to do something like that. those are additional planning
amount of money to move us forward on that project. >> two things, one we are trying to complete an environmental study in the corridor. that is scheduled to be done about 2015, is that correct? >> that's right. it's the tier one for the corridor which will set the framework for the entire corridor and then you go into tier two and that process looks at individual projects. some of the delays that occur in the environmental process come when the individual projects are considered and the advantage of bringing the resource agencies in early in the beginning of the planning process is that when we get to tier two, we can say that we think -- save significant time because the resource agencies will have bought into that.
they won't come in the way they sometimes do at the end and say we don't like the way you did the analysis and you have to re do it or you have to look at two or three alternatives that were dismissed early on but they weren't at the table when that analysis was done. so we are hoping to, as i said, complete the tier one by 2015. by the way, we do need additional funding. the first phase of that we had $9 million. that will be completed in february. but the next two phases will cost an additional $30 million and we need additional funding. >> has that been requested in the budget? >> i believe so but i'll get back to you on that. >> anything we can do to speed that process up. does that include the entire corridor, all 47 or just parts of it? >> it's the entire corridor. >> i was wondering again if any of this could be divided up and
expedited and that's something else i'd like to look at and discuss with you all. i have more time to focus on the northeast corridor after the beginning of the year and i'd like to make that a priorityty moving it forward. but you'll need the money if you're going to complete the plan. >> that's right. >> then when we get that we will have alternatives analysis? >> yes. >> at that point and junk chure, we had secretary lahood here and he was talking about high speed rail and he said we will need the money and he will be opening these opportunities to private sector competition. do you see any problem with that? >> no, as he said last week, and i think he's been quite consistent on this, we welcome private sector investment to be able to leverage the public
naunds are available. we want to make sure that where that money comes in makes the most sense, is the most cost effective way to do it, that the contracts are put together in a way that protect public interest. >> i would concur with all of those, particularly our job is protecting the public interest. also i think it's important that we maintain the ownership of that infrastructure that we're contributing to build along the way. i think you're never going to get the congress to give you $151 billion even over a period of 30 years. but if we could attract private capital and that's where our managing director of morgan stanley maybe could she had some light. right now we take in about a billion dollars. we have 12 or 12 million passengers on that run. if that was 40 million
passengers, of course there is cost in adding capacity and the infrastructure to support that. how much money do you think could be raised, any thumbnail idea of what that kind of activity would support, that revenue? >> we probable have about $4 become coming in from passenger revenue at that stage and could be am tiesed over a number of years. maybe you could tell us what that might forecast for investment. and i know you said there have to be conditions, government guarantee in backup which could be done. with that kind of revenue, what kind of investment would it support? >> thank you, mr. chairman.
it's hard to put a precise number on this of course. but i would say we're in an environment where there is more and more capital to be invested in infrastructure projects globally than there are opportunities to invest that. and i say that because there are a lot of project that is are not profitable and are very difficult to make the math work from a business standpoint. the northeast corridor, i believe is definitely an exception to that. it's profitable currently and i think with additional investment could be a lot more profitable. >> if we had $4 billion in revenue versus one million, there is nothing gog to be a nice net return. would that support 20, 30 or 40
billion in investment? >> it would be private equity capital. i think with that steady type of cash flow, i think what people would get comfortable with when you look at the cash flow available for debt service, let's assume all the cost you get to something in excess of $2 billion, you could argue that there is at least -- basically it's hard to give an exact number but it's multiples of that that would get you comfortable for debt service. these numbers, there is no other project like this because it's so huge relative to what people have been investing in in the past. >> there is interest and capital seeking projects of this nature, one of course of this magnitude might have a great deal of interest. but my main thing is to get our alternatives and get this
environmental study done and then look at the possibility and take proposals from the private sector to build this out. and whoever the operator is or working with amtrak has to also honor the labor agreements. i think i'm looking at it, trying to look at it from a positive standpoint of what we could do. there are so many benefits, the air traffic con jex. even with next generation air traffic control which won't be developed in the quickest, i'm trying to speed that up. maybe 15 years. you can only fly so many planes so closely together. they can only land so many planes. i've watched them land and see we're max micing even with the stewart addition of the fourth
airport, you will still run out of air space. but taking this traffic to the corridor and the connections that we have. a question was raced by ms. brown about impeding some of the service along the way. actually if it's properly done and there is separation, we can enhance local passenger service commuter service and we can also increase freight traffic by again separation within the corridor with the right plan. so i look forward to working with you mr. boardman, with the deputy administrator and others. and thank you for participating today. we're going to leave the record open till the 31st of december. how is that for a date, without objection. and we'll have additional questions we'll submit to you.
may i yield to ms. norton. >> that's a fine date. we'll either be over the cliff or not by that time. i appreciate this hearing. i want to say i have an a supporter of private projects in my own subcommittee on economic development where it's better known and better understood and extensively used. i have -- and therefore, i'm very interested in its conceivable application to a railroad. if we did more public private partnerships in construction and real estate in my other committee, we would have saved billions of dollars. now i want to see if that's the same if we're talking about railroads. i noticed that your examples
where you were recently advised on transactions tend to be examples like parking systems, concessionings, parking concessionings, airports and the like, have you ever advised on any project as large or as extensive as the northeast corridor? >> i'd say there are a lot of projects i've worked on that are similar understand terms of airports there is lots of complexity unique to airports. but this is a unique project i've seen in the u.s. or around the globe especially as it relates to cost. it's not just me speaking, it would be anyone in the financial communityty that's used to seeing transactions where an equity check of a
billion dollars is considered large and this is something that could support significantly more than that if structured appropriately. >> if the capital is available for such a project like the northeast corridor. now my recent experience, i'd like you to describe what you think is the reason for our recent experience where the department of transportation put out requests for proposals, did get a few, but none for the northeast corridor. why do you think that the d.o.. the got none for the northeast corridor since that's only really profitable one? >> one i'd like at the example of the florida high speed rail project which had been considered at one point in time and there was a list of groups that had formed that expressed interest in that and they were
really truly some of the best operators around the world for high speed rail, some of the best construction companies and some very well-known equity sources as well. so i think there is a lot hoff interest in general. but what the private sector has seen multiple times before are project that is are still very much in the conceptual stage and are concerned about spending significant dollars today until there is more clarity on the projects because they cost a lot of money to have consultants and others to analyze it. and that's why i mentioned political will in my testimony, not that on both sides of the house there is clearly support for projects like this, but there is a lot of details that need to be dealt with in terms of what the actual economics may be. then once those are determined then i think there will be a lot of interest from the private sector. >> i'm looking at page six of
your testimony, you say that contribution equity contribution from private investors tend to be approximately 10 to 15% of the total project cost given its cost of capital. does that sound like it would be sufficient for who wanted to be the private partner in the northeast corridor? >> i think that's a question for a lot of other people that would be involved in the project if that is enough. and if you think about the total needs for capital, how much would you need from the private sector to close that gap. when you look at private partner transactions in the subset than in australia and the u.k., they tend to be only
about 10 to 15%. money comes from the private sector in terms of equity, that is. and it really is because the cost of capital for that equity is definitely based on precedent deals north of 10% cost of capital. so for projects like this they would start with grant money first, then maybe any potential subsidized or low cost loans, and then eventually figure out how much more additional capital would be needed and dowled private sector come up with that amount. and given the size of the total project, i think we haven't had the ability to say if that's -- if there is enough capital to do that but in segments and given general interest in rail, i believe if structured appropriately there should be a way to do this. >> but you say 10 to 15% of the
total project cost would come from private capital. >> that's right. >> where would the rest come from? >> if you look at some of the examples like the toll roads built in florida a lot of it comes from federal or state funds. it's not to say these are grants but a lot of times they are programs which are low cost loans that would be supported by the project that represent roughly 50% of a total project cost. >> might be low cost loans guaranteed by the government? >> that's where a large percentage have come from historically. >> we're going to move on and we'll come back. we are going to have several round here. >> along that same line of questioning when you are looking at a project, what percentage of the project do you normally look at as being needed to be funded before
private capital comes in and what type of return are you looking for? >> so the clients on the private side that i spend time with, obviously her going to look at a return that is consist wnt a project. if there is an vablet payment as i mention in my testimony where there is comfort there is some base level of cash flow that drives the return expectation down to somewhere in the low double digits so maybe 11, 12%. if you're talking about a project where there is a lot more volume tilt then the project for a green field new construction project could be in the 17, 18 to 20% type returns. so i think the reality is that these investors who represent a lot of times pension fund money are looking to deploy that
capital on a global basis and will find projects that meet that return. that's why the% sadge a much smaller percentage of the total cost. i think the first part of your question is figuring out when that money is available. there is definitely money theas been raised but when it comes down to any given project if if total cost was a billion, there would be a calculation given the project's future cash flows and what other sources of capital could be available from federal, state, local funds, forms of debt capital that could be funded on the project basis, on a taxable basis or even a tax exempt basis how much would be left over and that happens after significant studies have happened in terms of writer ship, environmental and so on and there is enough
certainty on what the time line of that project might be as well. >> what point and what type of information do you need before you present this to your investors on investing in the northeast corridor? >> i believe there are processes going on in terms of a writer ship study. there are analyzing what if any kind of environmental work would be needed. things that would be able to develop a financial set of projections based on certain representable advisors or consultants that would back those numbers. i think once there is real projections on the capital and operations side, then i think it becomes a very tangible analysis that the private sector can get involved in at least on the equity investment side. >> what type of information are
you looking for coming from -- or what type of commitment are you looking for from congress on the overall project? fits a hundred billion project are you looking for 80% to be funded or are you normally willing to jump in half way through the process? >> sure. there difficult nitly is not a specific percentage that's required. it comes down to math. it's math in terms of making sure that the return is reached. it's also there is a limit in terms of how much equity capital would be invested in any one project. i mentioned in my testimony and there's been other mention of hundreds of billions of dollars that'sen been raced. that's true. but any different fund advisor is going to be limited by how much they are going to be tible put in one given project.
the numbers we've talked about are unprecedented in terms of deals that have actually happened. >> i'm just curious on what point you actually get the information and take that back to your investors and what point you're able to not only present that to them but get a commitment overall to the project. if this is a 100 billion project that has 3 billion allocated to it. do you get sflolved a phase or do you need to see a certain amount of budget allocated before you're able to put your financial picture together for your investors? >> there is definitely the ability, again for the broader private sector not only the investors but construction companies to get involve in early stages of the phase to give their thoughts and structure things in a way that will get to the right conclusion. and given the size and scope of this project i would think you
would have different phases for that to happen. where they will spend the most time and effort is when there is a better sense of when that first phase will actually start or get close to the construction portion. and maybe the six months leading up to that is clearly where all the funding will have to come together and again, all the private and public funds will be available. >> so on a huge project like this, it does not make your investors nerves to get involves in a face one or two of the process even though the overall budget isn't put together. >> i think a lot of people would believe in this project in the long run and would be happy to dedicate a fair amount to try to make the process move forward. i think it's a matter in some of these cases they could spend millions of dollars trying to analyze the project and come up
with construct that is might make the procurement of it work. but also concerns is that money be something they can recover eventually if there say process. it's a long way of saying they are very mindful of how much they do spend up front but i find they would be willing to engage at some point early on and hope they've helped give some guidance that could actually turn into a process they could be sflolved later. >> so you would write a clause into any contract that said if the project significantly changes then there is some type of payment back to your investors? >> that is one way of doing it. i think there are people in the private side that are willing to have fund at risk where they could say given a certain amount of they would spend out of their pocket they would not expect to be recovered at all. but there have been discussions
about ways you could engage the private sector and give them comfort if things dwate dramatically they could recover something for their time and efforts, that would be helpful. >> how much does that compensation change depending on the risk or how much does the risk change depending on how material project is? >> obviously the earlier stage and less defined the sprodget the riskier it is. i would say there aren't any specific at least in terms of the equity capital side specific funds dedicated to passenger rail projects so i think it would be trying to figure which groups would be the most interested in taking that risk. and the groups i've heard of would be the international operators, one obviously amtrak has teamed up with before the french operators are
believerers in this project and other projects in the u.s. and have given guidance and not expect any kind of compensation in return. >> and one final question, this is $151 billion project with 3.3 allocated from the government. is there state bond on this, any type of bond? >> no bond. comparing that to california where you've got a $68 billion with 9.5 billion bond. you've got a bigger percentage allocated between state and federal for the high speed rail. which is a better investment for morgan stanley? >> i think the investors would view the northeast corridor given the view you could go from boston to washington d.c. even if it's not done in all one phase initially. it's profitable and has room to
be more proftable. california until you are able to get from the two major areas from denty san fransisco to l.a., if you are only talking about the central vlly, i think that becomes a proposition andless if there is available pramente that i mentioned before, then no someone going to take that traffic risk because there is no history of large traffic between there. at some point you are still going to connect by the california plan san fransisco to l.a. if you've got $68 billion project and you've got a much larger investment between state and federal dollars, why wouldn't that be less risk unless you have a huge question about the ridership numbers between the two cordors? >> i think it all goes to phases. it's hard to say which is better. if both were built tomorrow and
were done. i think both in the u.s. are both very interesting and potentially very viable projects. i think it's difficult to be able to convince the private sector that the time line is going to be within a reasonable amount of time. most of these funds have been raced to be invested over the next ten years and a project such as the california one clearly as has a time line that could be well beyond that. thank you. >> i'm fassnited by the private public notion and how real it is. did you say you would expect 11 to 12% return on investment? >> there is definitely debt capital and equity capital. on the equity side i would say the lowest possible rate that
equity would be willing to receive would be a return of 10 to 11% and that be under a structure where most if not all of their key risk were mitigated. so traffic risk for either a portion of all of the system. so that just gives you a sense of how much more expensive that the obviously relative to the riff program which is based on treasuries and other types of funding sources. for the record the $3.3 billion that was spoken of earlier, that's really recovery act money and some aprorpeyation money, it is going to for lack of a better word, mr. boardman could perhaps elaborate, i would call basic upkeep, not even upgrade of the kind i would consider necessary for high speed rail. isn't that just getting amtrak
so that those trains can run safely and on time as they say? >> ms. norton, i'm not entirely familiar with the $3.3 billion number what it consists of in terms of the recovery act we talked about 336 million. understand terms of investment for high speed the only thing i know is 450 million on the corridor that came out of the florida flooget we're doing in new jersey. >> so no investment that we could call high speed investment yet. i'm asking this because i need clarification on infratruck structure. does your view of the private investment assume that the government has in place and has funded all the needed infrastructure or is the
private investment needed? >> it could be structured either way. there are examples when florida high speed rail project was considered, the idea that 100% of the capital cost could have been funded through government funds and the private sector would take responsibility of the operating cost going forward. that was one concept that had been discussed. >> moving right along. >> so i don't know if the northeast corridor would be that way or not. i think there are examples where a large percentage -- for other projects a large% of the capital cost would be covered by the private sector. given this magnitude, it is unprecedented. not to say it can't be done -- >> some of the questions we're asking you are almost
impossible. i think if one was going to do anything, one tuth do it on a section of the northeast corridor and see what you got. but we do have some rough aal jiss that trouble me when i try to apply them to a railroad that has to go and can't stop and is dependent upon and that's f.a.a. i saw the f.a.a. bill held up here year after year after year. negotiate party seemed to be able to move it, finally got to the point where in airports around the country, they had to stop all of the work on those airports because congress had failed to pass its bill, it's public part of the bill. could i ask you whether public private partnership of the kind
you are talking about is even suited for the way we fund prodges? we fund projects on an annual basis. that means that the federal on an annual prorpeyation basis so that means that unless there was also negotiated a way to keep whatever government funds were part of this deal coming, wouldn't the private public partnership be in the same position as the f.a.a. was, some years where there is nothing because there is no agreement in congress? this is democracy and the wray in which it works particularly whilt comes to money is sometimes congress does and sometimes congress doesn't which and i'm trying to apply that to a railroad which depends on the congress coming up with its share of the operating funds and i'm having trouble. >> i agree with that point.
for much smaller scale projects for example a courthouse was built ining long beach california, all of the funds are subject to prorpeyation that are coming from the government each year. but coming from the scale the investor was comfortable that money will come. i think when you're talking about the manage any tuesday here that cazes it to a whole other level, that's right. >> it seems the infrastructure of the government would have to change to support any new inroad into public private partnership of rrses. thank you very much. >> you said in your testimony that you've got the right pieces and right people in place. do you currently have any private investment in the project? >> is there currently any private investment in the northeast corridor? >> correct.
>> yes, there is. and it's in the stations. as mrs. norton is familiar with the yuan i don't know development of union station involves a significant public private partnership with a private real estate developer. and the same is true with the proposed redevelopment of the station in new york. so yes, with respect to stations there is great opportunity to leverage private investment for the development of those stations to pay for the transportation function of those stations. decpwhrand how about as far as phase one the rail or the environmental process? >> what we will be doing in phase one is to evaluate what potential private investment might be, that is definitely part of the scope of work of phase one, so we will be
studying that. >> and how about phase two, what type of private investment are you looking for in phase two? >> well, we will find out in face one what we -- that is what phase one is to find out what the potential is for private investment for projects going forward. >> unlike in california, the northeast corridor service provides my numbers show 75% of rail air market. what's the proportion of passenger rail transport in the air rail market for california? >> i don't have those numbers but i know there's been a study of what the impact of the high speed rail project would be on the congestion between san fransisco and los angeles, how much of that traffic is expected to shift to rail.
i don't have those numbers with me but i'd be happy to get those from the authority and make them available to you in the record. >> and you also would have or the authority would also have a 30 year projection? >> i don't know exactly what the nature of the projections are but we'll get the information they have and make it available to you. >> and you have a 30 year projection available for the northeast corridor? >> for the air rail split? >> yes. >> that i do not know. you know, the -- i would defer to mr. boardman on this. the introduction of the service itself in 2,000,, i think the air rail split was something like 30/70 or 40/60 and then it flipped it's now 75/25. theover whemming number of people going between washington d.c. and new york prefer to
take the train and it's not because it's always cheaper because the service is not. it's because of the time savings and the convenience. >> mr. boardman, for the northeast corridor 85% of the population live within 25 miles of the northeast corridor making it very accessible. how would you compare that to california? >> one thing i would say is that the air rail service between san diego and l.a. is entirely rail because it doesn't work the way that -- as close as they are to each other and the way it operates. but when you get l.a. to san fransisco you only have to cost starlight so there isn't a sufficient amount of data that
would tell you what would really happen here. so from that regard, the old train -- and i can't remember right now what they called it, was the primary way they moved up until 15 years ago or so between san fransisco and l.a. and it was probably the most profitable of the private railroads back years ago in regard to that. in terms of the northeast corridor, we have a projokse of what the revenues would be 30 years down the line. and probably very little air service in terms of boston to new york and new york to washington because you'd be at an hour and a half between new york and washington. so you would really wind up with very little air service. and that if you remember back
in 2008, and you may not, but there was a great deal of discussion by the aviation or former aviation executives that that's something we should do in the northeast so that those airports today could be used for longer distance travel and that we use the mode that made the most sense which would be rail in those cordors. that would garner us pretty close to $5 billion in revenue a year. >> so you cannot draw a direct correlation between california's high speed rail and the northeast corridor? >> not here. i can't draw that conclusion here because you don't have the right data sets which we may have some folks that have an analysis and i can look at that and get you an answer back. >> thank you.
>> thank you chairman. nice to have you here. the advisory commission, you're in the process of developing several other reports analyzing the pressure that would be taken off -- projected pressure off of airlines and off of roads and what that means to the northeast corridor. will that report be done and what will we be able to get out of it to tell us about the save thags might be ib incurred just by virtue of the pressure taken off of those other two or three modes of transportation? >> it's nice to see you congressman. >> thank you. >> we're undertaking several initiatives. number one what you will get in early january is segment by segment up the corridor what
the various infrastructure investment requirements are and it's important to note that while it is done in a segment by segment basis, the commission views the corridor as geographic cli silent. we don't look at the borders between states. we really look at the investments that are needed for the corridor overall. so you'll get that? january. number two, in coordination with the coalition, we are doing a highway intercept study. and what we are doing there is looking at ways that in cooperation and collaboration with the northeast future study, what types of people who currently use automobiles would then transfer to the train inner city passenger rail. and that is going to be completed sometime in the spring. so you will get various updates
on . that and lastly our primary initiative we're taking right now is the cost allocation method doling which is part of the legislation that congress enacted which created the commission to see what types of cost sharing allocations need to be done between the states, amtrak and the federal government. >> will you be projecting the cost savings of any anticipated improvements in those facilities in the absence of the northeast corridor build out? >> i think what we've all been doing as stand alone states and parts of the corridor is looking at what those cost savings are. for example, in new york we just instituted a major way of doing business on the service between -- and it was a
wonderful collaboration with amtrak, csx and the state as to how those cost are allocated and those are the things we will continue to be doing. >> so that won't necessarily be broken out in terms of potential federal savings or federal offsets? >> i think the challenge that we're facing is first and foremost, we're talking 150 billion here and we see significant capital investment that is need to be made. so one of the primary questions that needs to be answered is how are those -- what are the funding sources to make those capital investments and what we are evaluating is there will be public dollars, as we've been discussing here this morning. what is the capacity and the ability and the risk associated with private sector investment
and how does that all come to pass? and then as we do that and we will look at where -- along with amtrak and federal railway administration where the potential savings are on the operating side once you make those capital investments. >> i understand. i'm just thinking oist in total, there could be a great many savings this body might want to see and understand. it's going to be a hard sell. >> it is going to be a hard sell. in my 20 years working with commuter railroads and in transportation, one of the reasons we're at the point we are right now, not to anybody's fault, but there hasn't been the type of investment made that needs to be made. we've all pointed to superstorm
sandy and fortunately the tunnel connecting new jersey and new york, even though it flood, it did not breach and that is huge. and a lot of times people talk about the tunnel and the gateway procket as fortunately tunnel connecting new jersey in and new jersey project. it's a corridor project. if that tunnel had collapsed, think of what would have happened in the northeast. not the northeast corridor but in the northeast. it would have paralyzed the region and the country. and we need those investments in additional tunnels in baltimore and new york and improvements in the bridges in connecticut to make this in new and system to attract the ridership we need to make those cost savings and that calculation work. >> i guess i'm referring to the fact that the $4 billion in revenue projected, that's just
one number, one benefit, one source. it's far from what we should be talking about and everybody knows that. but the more you can give us, the different angles you might take, i'm sure it's all going to be helpful. >> and we will do that with amtrak and our partners at u surks dot. >> any further questions from any members of the committee? >> i'd like to thank each of our witnesses today. today's hearing will remain open and unanimous consent that the record remain open for 15 days for questions submitted by members of today east hearing. i'd like to thank our witnesses for your testimony today and appreciate you working with our legislative calendar today. if no members have anything to
add, the committee >> in new town, connecticut this morning, 27 people have been shot dead according to a report by the associated press. one of the gunman were among the dead and the reports from the scene are still coming in so those numbers have been not been confirmed. president obama spoke to connecticut's governor and he also spoke to his counter terrorism advisor. the president will speak to the nation in about 15 minutes at about 3:15 and we will have that
live for you here on c-span. lawn laarson, saying "there are no words to express the horror of this senseless violence aimed at our children in what should be a safe place of learning. my thoughts and prayers are with the families and friends of the victims of this tragedy. i know everyone will come together to help the community in this time of need." that is from john larson of connecticut. you can follow more at twitter.com/c-span. a tweet from john boehner he has ordered the flags over the u.s. capitol in ib truth to the victims and families at sandy hook. he says no words can console the families and parents at sandy hook. and the newtown shooting is a senseless tragedy.
thoughts and prayers are for victims, families, and the sandy hook community. we will take you live to the white house in just a bit at 3:15 to hear from president obama. until a portion of "washington journal"." >> we want to welcome sara from "the washington post." we want to take a look at different aspects as what we can expect as we face the january 1 deadline. we want to talk about the formula that is now in place. many people say if you want to understand what is going to happen you have to understand the docx fix. >> it is something we've had in washington about a decade ago. congress set a formula on how they were going to pay doctors and it was supposed to console our health care costs. it worked for about five years
until the costs of health care grew faster than the formula. the formula says what the doctors should pay. so every year we get to the end of the year and there is a gap, right now if we don't pass the doc fix medicare goes down. every thinks it is not a good idea, that we should fix it permanently but we never quite do it. it is something we face every single year. >> let's in terms of numbers if nothing happens next year the cost is estimated to being $25 million and in two years an excess of $41 billion. >> that's right. it is expensive and we have to find a way to pay for it. we're looking for some other cuts we can make to total those
amounts. if we want to fix it for the next decade the price tag goes up to $244 billion. >> if you're a doctor and you are facing this, what does it mean in terms of accepting medicare patients? >> every year it is a debate and a lot of doctors assume it is going to get fixed. you don't see doctors at the end of the year saying this is crazy, i'm not accepting patients. if we were to fix the doc fix you have a lot of doctors saying i'm not accepting that pay cut. we haven't seen that play out because every year washington has come through. >> they came through with a s.g.r. what is that? what is the formula and how does it play into all of this? >> that is the formula that congress crealted back in 1997. the one they thought would
determine how much doctors would get paid. it came after two other formulas that they tried and failed. it is a tricky business to try to figure out how much the medical costs are going to grow. it worked for about five years then the cost of the health care kept increasing. each year we had to do these multibillion dollar payments to sure up the formula. >> how did this come about? what led to it? >> it was back in 2002 was the first time that the sustainable growth rate was too small where doctors took a pay cut that year. in 2003, they decided they did not want to give doctors a pay cut so they passed the first pay patch. it has grown year after year and has become a bigger budget items has medicare has more patients
and the cost of health care increased. >> how is washington preparing for this come january 1 then i want to ask you about doctors specifically. >> usually there is a lot of talk about the doc fix at the end of the year. actually, it has become bigger, you hear less about it right now because of all the other issues that are happening. so you do see doctors on the hill, they are lobbying on the issue, they within to make thursday the pay cut doesn't go through. they also want to make sure programs they really care about does not get cut in the process. certain reimbursement levels are not being lost for them. >> back in 2002, congress did not implement the doc fix and that has never happened since. what led to congress' inaction? >> i wasn't on the hill at the
time. but my understanding of it was the first year it happened. it was a smaller cut. we were not looking at a 26% cut at that point. it was a much smaller cut. i think folks were cut off guard then because it was working for the past five years. >> if you are a physician facing this in january, what should you prepare for? >> there have been a few times where they have gone past the deadlines by a few weeks and medicare held off on pro processing claims for a few weeks. so we're not able to get this fixed by january 1 you may look at some disruptions in your billing process. however, if they are able to pass a few months of funding for the sustainable growth rate then business should continue as
normal. >> our phone lines are open. you can send us a tweet or e-mail at c-span.org. we'll go to iris joining us from virginia on the republican line. good morning. >> good morning. i just feel like -- hello? >> yes, you are on the air. go ahead. >> the speaker that is speaking, i beg to defer with her because we have been without a doctor -- my husband is on medicare. i'm paying for an individual policy but we've been without a doctor since june, she moved. our group practice told us they can't get a doctor. that the doctors are coming out at the university or wherever they are not going into general practice and internal medicine because of the medicare situation. they are going where they can
make more money. so we're still without a doctor, here it is december. >> what are you doing? >> an on staff sees us if we need a flu shot or whatever. as for having a doctor who knew our routine and someone we would feel comfortable with we're waiting for them to have one on staff. >> where is rochelle, virginia? >> we go to the county that is nearest to us. it is a university of virginia practice out of charlottesville. we normally always go to those doctors and they treat mostly elderly. >> iris, if you have have a life situation or need to see a fission for, anything beyond a flu shot, what do you do right now? >> that's what i said. we have to see whoever is on staff there that is still there. as far as, you know, any kind of
situation. my husband just had shingles and he was being treated for that and we called to an apointment. they usual tell us to go to the emergency room in charlottesville. >> i think her question speaks to a larger problem in our health care system right now. where primary physicians and the services they provide are paid by medicare and medicine -- medicaid and they go into another specialty where they can earn twice as much. this is less tied up in the doc fix and more into how we pay the doctors who are serving us. there is a big move right now in the insurance companies in the federal government. they are making changes to try
to pay health care providers a little more. >> let's take a step back and share the politics you and behind this. from the democratic leader, she spoke to reporters yesterday and the issue of medicare came up. >> as i said, don't think about raising the medicare age. we are not throwing american seniors over the cliff to give a tax cut to the wealthiest people in america. we have clarity on that. >> so the medicare scombrirblete age is shaping up. republicans have said that is something they want to come out of negations and the congressional democrats, a lot of them, including victor from illinois, one of the top
senators. he says no way. the president has remained open so it is difficult to see where the issue lands. what it would mean is moving the medicare eligibility age. >> on the other side of the equation is issue of spending and you look at where the government dollars go a lot of this dollars go to social security, medicare, medicaid. speaker boehner was talking about that yesterday. >> i'm not concerned about my job as speaker. what i'm concerned about is doing the right thing for our kids and our grandkids. if we don't fix this spending problem their future is going to be rather bleak. >> this doc fix will cost about $25 billion. where do you think it is
heading? >> i think it is heading into the christmas season because there seems to be an impasse right now between the two parties. with medicare, most of us suspect to see some kind of changes or cuts. republicans are not going to sign on a deal that does not have some kind of change to entitlements. moving the eligibility age to 67 is one of the big changes they have talked about. >> states facing a double dual fiscal whammypy saying the problem for states is that revenue for states is decreasing and health care costs are skyrocketing. >> medicaid is a huge budget item. they have found that states are spending more on medicaid that covers low-income americans,
they are spending more on that than they are on education. it is eating up a large part of the state's budgets. the challenge with medicaid -- a lot of folks in washington don't spent that to get cut. that goes to the fact that they are trying to convince states to participate in the health care expansion. they are triretting to get states to participate so they don't want to send the wrong message by slashing medicaid. that has more pressure to -- >> with dealing with all of this, this year to year corrections, whatnot make some long-term adjustments to the doc fix? a lot of people in washington advocate for that. they would like to see that. it is really expensive. if you're going to do it for a
decade you have to find $244 billion. it is easier -- even though it is less stable and most folks don't like it in washington but it is easier to find $25 billion than $244. >> we will break away from "washington journal" here on c-span and take you live to the white house for a statement by president obama about the shootings today in newtown, connecticut. it should get under way in a moment.
tragedies in the past few years. each time i learn the news, i react not as a president but as anybody else would, as a parent. that was especially true today. i know there is not a parent in america who doesn't feel the same overwhelming grief that i do. the majority of those who died today was children. beautiful little kids between the ages of 5 and 10 years old. they had their entire lives ahead of them, birthdays, graduations, weddings, kids of their own.
among the fallen were also teachers, men and women who devoted their lives to helping our children fulfill their dreams. our hearts are broken today. for the parents and grandparents, sisters, and brothers of these little children and for the families of the adults that were lost. our hearts are broken for the parents of the survivors as well. as blessed as they are to have their children home tonight, they know their children's innocence has been torn away from them too early and there is no words that will ease their pain. as a country we've been through this too many times, whether it is an elementary school in newtown, a temple in wisconsin, a movie theater aurora, these
neighborhoods are our nareds and these children are our children. we're going to have to come together to take meaningful action to prevent more tragedies like this regardless of the politics. this evening diminish el and i will do -- michele and i will do which is hug our children a little tighter. but there are families in connecticut that cannot do that tonight and they need all of us right now. in the days to come, if community needs us to be at our best as americans and i will do everything in my power to help. nothing can fill the space of a lost child or loved one, all of us can extend a hand to those in need, to remind them that we are there for them, we are praying
for them, that the love they felt for those they lost endured not just in their memories but also in ours. may god bless if memory of the victims. and heal the broken hearted and heal their wounds. >> president obama in the press briefing room addressing the nation on the horrific shooting today in newtown, connecticut which killed according to the most recent reports, 27 people, including 18 children. those numbers are not confirmed. we're opening up the phone lines for your reaction. if you are in the east coast, your number is 202-585-3558.
for you in central and mountain use 202-585-3886. and if you are in the pacific, the number is 202-585-3887. we'll try to take a look at some of the twitter feed also well. that is the view of the capitol. speaker boehner ordering the flags at haffle matter of fact and the president has ordered the flags lower. the fact that the president orders the flag at half matter of fact that is from our twitter site. john is in newport, rhode island. >> i hate to say it but this
time that we're living in it is about time that we have police officers in every single school due to the fact that one lost life of a child is too many. it is about time and i'm not working right now and i will be the first in this town to do that to our schools. i would donate my time to protect the children. it is about time we put police officers in the schools. thank you very much. >> john in newport, rhode island. a number of members in the delegation, a number of them on the scene. here is christopher murphy who was just elected, who represents where newport is located. he said i'm shocked and saddened by the news of sandy hook elementary school this morning. i pray that students, staff,
teachers, reach safety as quickly as possible. he also said that while we don't have much information right now, our thoughts are with the victims and loved ones. that is from the senator-elect in connecticut. next up is randy in florida. go ahead. >> i appreciate you taking my call. there is no words in any language that can express the pain and the saddenness and the horror of these evil incidents. but i know we're going to end up public sizing this and i have to say -- if the adults were trained and if the adults were armed and these other incidents that have happened there would be less chance of children being dead because the adults would do what the adult always do which
is protect the children. >> do you think in a situation like that where reports say that he fired over 100 rounds that the adults could have much of an effect there? >> they would have a bigger effect by having nothing in their hands. when there is no security, there is nothing of loss. some way we have to figure out that we have to exdefend ourselves as individuals, and we have to defend our families, and we have to defend our children. it is so crazy that these insane individuals that do this for attention, that do it out of malice, they have a free hand. all of these incidents that you see and you read and you hear about or if you are unlicky enough to be involved in they have a free hand because there is nothing there to stop them. >> the report says the alleged
shooter involved in this among those dead. the number up to 27 according to the associated press. the president says it is time to take meaningful action "reguaranteeless of politics." sam in san francisco, go ahead. >> i'm hoping that at some point the society will start addressing the root causes of this. i remember when columbine first happened and it was shocking for people. now this is happening basically every day. so many people are unemployed, the political system is not functioning, our media is not doing their job and people want to talk a defending themselves. what about addressing the root causes? the fact that society -- we
don't even address mental health issues. they don't even address the mental health issues of the soldiers coming home. they encourage them not sign up. they deny them benefits, i think it takes a year to deny benefits for a returning soldier. >> no indications that the shooter was a veteran. we take a live look at the flag above the white house which has been lowered to half staff as ordered by the president. this is michael. hi, there. >> hi. i want to extend our families condolences to the families out there in connecticut. i just hugged my daughter and she has -- she is a kindergartener herself so we can feel the pain that is going on
today. >> michael, how old is your daughter? >> my daughter is 37. >> thanks from calling. cynthia is in iowa. >> i want to say that i'm sorry, however, the news media has to stop treating this as it is entertainment. we have to stop headlining it as it is a movie title. we have to stop 24 hour coverage because all it does is encourage the next guy to think this is something we can do. i don't need to understand how sick this gentleman was -- he is not a gentleman, how sick this individual was. i don't need to understand about it. i need us to stop making heroes of them. >> how should media cover an event that possibly 30 people
have been killed? >> you cover it like when i was a kid. we donal have journalists any more we have entertainmenters. when you have 24 hours to kill you have to come welcome back bantser that does not do any good. when you have a new set of facts then give me that but don't give me 24 hours entertainment. >> cynthia from iowa. john said today, there is no words to express horror of the this senseless violence aimed at our children in what should be a safe place of learning. my thoughts and prayers are with the families and friends of the victims of this tragedy. next up, russell in california.
russell, you are next. >> yes, hello? >> you are on the air make sure your mute your television. go ahead with your comments. >> yes, i'm really sad to hear about what happened today. but you know something, in a place like chicago this happens in drive-by shootings, because the availability of guns. it is not a big story. but now that it happens in a place like newtown, connecticut where the victims are -- how should i say of a different skin color, it's big news all day long. >> the president alluded to shootings in chicago in his statement. let's go to florida to hear from karen. >> hi. i am a teacher and it greatly,
greatly saddens me to hear of the incident today. but i must say the early caller who said, the individual that said the adults were armed that this situation would no happened. i disagree. my opinion after teaching x amount of years that our system fails our children, the parents -- a good majority of parents nowadays fail their children. they expect the teachers to raise their children. the school system is not given enough money to help the children in a way that they need to be helped. therefore, we turn out individuals such as this kid 20 years old who goes in kills his mom and kills kids.
our system is majorly flawed. our education system is unbelievable and the incident today that -- i'm flabbergasted. one of my students i've been trying to get help for six months. >> what grade do you teach? >> i teach fourth grade. it starts elementary level. >> we're taking your calls and reactions about the shooting today at the sandy hook elementary school in connecticut. the outgoing congressman, he's the senator-elect here's his statement. "i am shocked and saddened by the horror riffic news from
sandy hook elementary school this morning, and i pray that kids, teachers, staff, and families reach safely as quickly as possible. the president came out and spoke to the nation. >> this afternoon i spoke with the governor and the f.b.i. director. i offered the governor my condolences on behalf of the nation and made it clear that he will have every single resource he needs to investigate this crime, care for the victims, counsel their families. we've endured too many of these tragedies in the past few years. each time i learn the news, i react not as a president, but as anybody else would, as a parent. that was especially true today.
i know there is not a parent in america who doesn't feel the same overwhelming grief that i do. the majority of those who died today were children, beautiful little kids between the ages of 5 and 10 years old. they had their entire lives ahead of them, birthdays, graduations, weddings, kids of their own. among the fallen were also teachers, men and women who devoted their lives to help our children fulfill their dreams. our hearts are broken today for the parents and grandparents,
sisters and brothers of these little children and for the families of the adults who were lost. our hearts are broken for the parents of the survivors as well. for as blessed as they are to have their children home tonight they know their children's innocence has been torn away from them too early and there are no words that will ease their pain. as a country we have been through this too many times whether it is an elementary in newtown or a shopping mall in oregon or a temple in wisconsin or a movie theater in aurora or a street in chicago. these neighborhoods are our nareds and these children are our children. we're going to have to come together and take meaningful action to prevent more tragedies like this regardless of the
politics. this evening michelle and i will do what every parent in america will do, we'll hug our children a little tighter and we'll remind them how much we love each other. there are families in connecticut that can't do that tonight and they need us right now. in the hard days to come that community needs us to to be at our best as americans. i will do everything in my power as president to help while nothing can fill the spiss of a lost child or loved one, all of us can extend a hand to those in need to remind them we are there for them. we are praying for them, the love they felt for those they lost endures not just in their memories but also in ours. may god bless the memory of the
victims. and heal the broken hearted and heal their wounds. >> president obama at the white house from about 20 minutes ago. we will show you the president's comments tonight and the reaction on the shooting at 8:00 p.m. eastern here on c-span. coming up next, we'll take you to a discussion on the future of homeownership among the participants bank of america's c.e.o. brian moynihan.
>> good morning. i'm vice president of the economic studies program. i'm pleased to introduce our keynote speaker bank of america president and c.e.o. brian moynihan. he has been the c.e.o. of one of the world's largest institution since 2010. 23 if you are thinking you see them everywhere, you are correct.
they bank one out of every two american households. i've gotten to know him through my work on the advisory countle. we're a group of community development promoters who offer thoughts to the bank on how it can best help underserved americans. brian grew up in a small town of ohio, the six of nine children. in high school he had a job as a busboy and worked after school at a plant. he later attended brown university, that is something we have in common where he played rugby, quite well i cording to my rugby playing friends and he met his future wife. he took an atypical path to the banking trade. he started out in the general countle's office in 1993 which
merged with bank of america in 2004 and was event eventually elevated to general counsel in 2008. when bank of america bought merrill lynch brian was named c.e.o. of the bank. so brian became c.e.o. at what i think we would agree was a tee mull sureous time. the bank has focused on reducing noncore assets as well as its mortgage service portfolio. fortune magazine wrote that he has proven his metal for two decades, as a team builder and crisis manager. he is uniquely suited for the job in today's banking world. the business is now so complicated with hidden dangers lodged in products that the best leaders are those who are emersed in the data and details,
the one that serve as their own risk managers. that is moynihan. so brian is going to speak and after that he will take questions then we'll have a panel discussions featuring several housing experts. please join me in welcoming brian moynihan. as karen said, she is a member of our national community advisory counsel which several of the members of the panel are, too and we appreciate the insight they give us. i'm grateful to be here with the brookings team to put together in important form. when you think about things,
there's a saying that says confidence never comes from we are tackled to think about the questions and the impacts of the recession and future population growth and future prospects in homeownership and lending standards and how to make sure future homeowner ship is sustainable and strong affordable rental program and the questions about the proper troll government and private sector abounds. by focusing on those questions, we can build confidence in the housing system going forward and the distinguished panel later we can discuss these questions and i invite all of you to keep pushing this dialogue forward and make sure we replicate things to make sure we reach outreaching programs. and looking forward having guided through one of the tough periods of time in the country's
and the company's life, i want to make an observation about where we are in the housing recovery. there's an incredible amount of work that's been done to help home owners in distress. we have implemented programs the government response ert including the home mortgaging bill. you've seen stability but obviously there's work to do. there are still areas of country that are hurting more than others. the housing market is showing signs of real sustained recovery. overall housing prices are up and housing demand is up which means that's a good thing overall for housing recovery and jobs. the national standards are in place and our company acquired
countrywide at the height of the housing crisis and in a severely distressed portfolio. today we have helped nearly 1.5 million, that's 1.are 5 million people avoid forclosure through short sales and other programs. today our company has ooh,000-plus people working on this, 50,000 people working on borrowers every day. to put in in perspective, only -- the industry has put tremendous resources to work in helping company get the right solution. the relocation systems in some cases up to $30,000. and we have principle reduction solutions. these prasms continue to make a difference for those commerce that can be helped but in
general principle forgiveness, default rates are still high in these programs. why? why is that true? because at this point, that the point in the cycle, it isn't the lack of the programs. it's other issues causing it. many commerce are still fighting unemployment or underemployment or have become unemployed or have unpredictable employment possibilities coming forward and lack the cash flow to sustain payments even the modified ones. so to help the customer get the right seclusion even if that means transitioning to rebel. 40 op. forclosures sales the property is actually vacant so we also must become more efficient on how we move those homes back into the system. so we get them useful again. getting vacant properties back on the market as soon as
possible makes it better for neighbors who don't want to see vacant properties. when a home is taken possession by us, we sell it within 60-90 days and others who donate rehabilitated vacancies. we partnered with habitat for humanity. and we have committed to donating over 1,000 properties to those focused on returning military. we have completed 150 donations to army specialist sler know who suffered serious injury in his last tour of duty in afghanistan. he and his fiance credited the new home with
providing the fresh start they and their family needed. so when we think about the future of housing, how does this supply it underscores a need to shape a system that keeps borrowers out of a home. it means shifting the conversation to those who own homes. as the housing market strengthens, now is the time to have this dialogue in earnest so we can be set to a more secure sustainable system for all those involved. i would like to frame the rest of the remarks for the homeowners and home buyers, lenders and the government. want to discuss some of the assumptions we need to challenge and questions we need to ask in terms of what a re-set might look like. for homeowners what are the re-sets we need to make around homeownership?
what is remarkable is given everything that people have been through in the past several years that survey after survey continue to show that the overwhelming majority of americans still aspire to homeownership. most americans still rank homeownership as their view as part of the american dream. but to look deep they are in those surveys, you will see much of the value is emotional, not financial. take for example the most recent fannie mae housing survey. the top two reasons for homeownership were to have a good place to raise children and to have a safe place to live. as a just democratic society we are all a good, safe place to live but a roof over one's head doesn't always have to come with a mortgage. some cases it shouldn't come with that. homeownership is valuable. it stabilizes a community, those things have been proven over time. for those who purchase a home
over time, a home can also provide a vehicle for wealth creation. it's important to recognize that much of the value provided during the housing bubble was more about expanding credit than it was for -- historically long-term average with homeowner appreciation going back to 1995 was 4.6% that includes the recent bubble and burst years. since 2001, the average appreciation has been 2%. so leading up to the crisis the purchase of homeownership, stability and security and savings got disconnected in the 2000s from the act of homeownership. the they are all for building long-term equity to cashing gains in many it became more about less about a safe place to live and more for creating profits. to 28% in 2006.
homeowners have a leverage in their home became the norm. cashout refinances so using the money for other things other than improving or developing the home completely disconnected that from its value. for eight consecutive quarters the height of the buildup in 2005 the cashout received 80% of refinancing so the question we need to consider is if people are going to take cash out of a home and buy for investment or properties to rent, should they be able to do so with mortgage capitals, especially mortgage capitals backed by the government? we need to ask if homeownership is right for everyone? we also have to challenge the assumption, mobility versus stability. other factors is two-income households, all the things that have become a port of our modern
society. work flexibility is locational decisions. in the case of the last recession and has been the case up until today. according to karen's research the volatility of household income rose nearly 30% in the last four decades. in addition to these realities, high unemployment and underwater home values have taught us sometimes flexibility and forced people to move and not be burned by people of virtue. the 30-year mortgage doesn't provide flexibility in most cases so we have to provide the flexibility of people relative to the housing and mortgage finance. we also have to challenge the assumptions of the purchase cycle. it's important to tons purchase
cycle in which you buy homes has fundamentally changed. macroconditions, the economy strong and growth was high rand house prices continued to rise. a lot of that stuff isn't true anymore. the world looks at the united states and united states looks at itself with a lower growth. if we were sitting in this room in 2003 the forecaster would have expected a growth in g.d.p. for the next six years ahead and long-term average over sustained decades ahead. 2003 those forkers were sitting here, they would expect 2.5% and long-term average of 2.7%. long-term has risen to unexpected levels. the duration is historical levels. the historical average is 13%. that affects people's stability and ability to make their mortgage payments.
there's also the issue of probability of unemployment. it's higher now than it used to be. u.s. household information has also slowed dramatic i will. average annual household growth has been about a half million a year less than half the pace of the first of the 2000s. then if you look recently. the demographic issues we just described are much different in different jarius of the country. in detroit there's substantial less population a debate about homeownership is much different like say in dallas where population growth has maintained its strength. so all these factors taken together. slower household information and certain duration uncertainty, all should make a purchase cycle slower. it will make it harder for a borrower to find an escape for a mortgage should it become unaffordable. another thing we have to
challenge is the assumptions about risk. ultimately we believe a more sustainable housing model rests in prudent standards and our ability to educate america about the inherent risks that come with the responsibility of homeownership. at bank of america we continue to focus on the non-profits to provide purchase counseling in connection with mortgages and coming out of the crisis credit repair we are working with counselers on steps consumers can take to prepare for their credit and sustained homeownership going forward to absolutely homeowner ship is important and the american dream is important but when you tons attributes and you have to understand the risks. each a responsible home buying decision has risk. i get letters from customers struggling. those letters tear your heart
out. it's letters from people who have the same reasons they couldn't fay mortgage, they have gotten sick or lost their jobs or gotten divorced. from the homeowners side we need to consider this. how do we help people make smart financial decisions based on assumptions that may not be true in the decade ahead? how do we prepare people for the risks and responsibilities ahead? now let's switch to lenders like ourselves. what are the resets we need? the discussion often becomes centered on the availability of credit. whether banks should simply be lending more. by being overly aggressive
caused the entire housing system damage and that wasn't caused by us not lending enough. we were lending too much. the u.s. had a dramatic lending of credit and credit to borrowers who previously would not have qualified or level at which they would not have qualified. subprime loans, little down payments. all the things we now know a lot about ex panneded dramatically. our bank of america primary window was countrywide. we exited subprime lending of our country's insist 2001. we were criticized by one for not being in subprime lending, and that was fine with us. we did so and still met our long-standing commitment at the same time we did not participate in subprime.
there's no doubt that the post crisis credit is tighter but also no doubt that a fundamental part of the lender re-set has been re-instituting quality underwriting. programs that no longer apply. but if you think about what the industry and our country has been threw and customers have been through there can be no margin for error ahead. we have to make sure the loan we originate is ironclad. that's not bad, it just takes a lot more time to get used to. but credit is available. we have extended more than $53,000 to more than 215,000 bar owers. 2/3 have been maid to lower income bar owers. access to availability of credit is critical and lenders have tighter standards. it makes for more flexibility though we can't go back to where we started. we can't go back to where we were.
we believe homeownership is to be pursued at all costs? i don't believe any of us believe that. that's good for both lenders and borrowers. there's been a lot of debate about down payments. there's a lot of debate going on about how big they should be, etc. we think about that, the 20% down payment is light years from what was going on before. but think about the implication of that. off 21-year-old child for a $100,000 home to save 20% how long it will take him to save that. that is an preliminary indication, so is there any magic to a 20% down payment? is 10% more available? we can't go to zero percent.
if you're hit with an unforeseen sneevepbt but they are also real concerns that too high a standard can block people out of homeownership. something we clearly don't want as an industry. we need to land somewhere reasonable that protects the homeowner. so these are questions we need to think about for lenders. first, how do we make credit available or protect people from taking on too much credit and ending up in a home they can't asnord second, how can we strike the right balance between homeownership and then we move to the third participant. the government. what are the resets for our government? in this area the government often becomes dominated by the g.s.r.e. and the request for
many to wind down fanny and freddie. why is the government involved in the first place? two reasons, expand liquidity, provide capital. second, by doing that, it makes homeownership more accessible. but currently our government role looks different. the government dominates the housing financal market back nine or 10 months. f.h.a. has been instrumental sustaining the market but have come a long way in traditionally helping. today they account for 20% of the market. they provide low down payment lending for loans $729,000. this is just an example where we need a re-set of our time. fannie and freddy continue to help in the uncertainty surrounding the market in today's world but we do need to move from a market dominated by the g.s.e.'s and f.h.a. and government sources to one that does one thing. first we need to return f.h.a.
back to its core purpose of helping low to moderate-income buyers and then they need to take a transition and provide clarity to what marketing service and risk they are willing to take. we can do that by removing some of the uncertainties about the rules that will take place over the next year as we move forward with the reimmediate yathes of the crisis.
dependency on the future of the housing market. these of the questions we need to consider. how do we provide a place for government financing that stays to to the -- true to the mission? let me conclude and then we will take some questions. there have been a lot of recriminations. we believe it is time to be said. to move past and move forward towards solutions. the chance to but the lessons learned to good use. it is a chance to question the .ld paradigms' it is our duty to provide a path to homeownership that will achieve a place to live, a place
>> the questions you raised in the last section. let me start where you started. the bank is currently working on 900,000 [inaudible] i was wondering if the easiest peace has been working at -- has been worked out. >> you aren't going to be able to find arrangements that keep as many folks in their homes and as a follow-up, what kinds of solutions are you allowing? >> on the first issue, we talked about the bank of america, how we had one million and six and down to 930 in 2012 but remember it's not the same people so you've had all the new entrants of delinquency and there's you know what i mean became delinquent 60 days or
more last month or months before that. so we're not through the programs, and we still modify 30,000-40,000 mortgages so the amount that's going through for lack of better terms is new dialogue. so new consumers and to the process so the overall levels are coming down but so there's plenty of relief left for people. when you talk about the programs going forward, they are all programs that continue to go on and you see the principal reduction and in the national mortgage settlement which offered a settlement to groups of customers but the modifications of programs will continue on past that. >> do you have a sense of how long it's going to take ultimately? well, as we look out, the rate of reduction is about 100,000,
75,000-100,000 a quarter, so if you think of the level we'll end up based on a portfolio of our size might be 100,000, so as you look across the next two years you will probably see that return more to normal. >> i know you suggested that we have no shortage of programs to try tackle these problems, and i presume you're partly referring to government programs. is there anything else you think the government could be doing to get us through the forclosure crisis? >> the number one thing is to get people divorced from the forclosure dries sis and the people generally have the problem of being unemployed or underemployed or the two-income families that go to a one- income family so i think the pub one thing so get people back to work.
you're seeing meaningful pick- up in housing which is one of the stubborn most places to get people back to work. we have to make sure we don't overshoot again, and i could have debates about that but the programs are there, but the investors are coming along. we still need more participation by investor groups to provide more fuel but if the economy continues to improv and we continue to see the economy continue to improv 2%ish, you're creating you have this jobs and things are getting better, and that's why you're seeing housing prices stabilize. are the pockets still hard? yes. but honestly it's time and americans are patient and would
like this all to be behind us but with time this is working through, and unfortunately it's been six years since housing prices quit going up and we're impatient as a society, and that's because we're a creative and entrepreneurial society and i'm sure fixing programs would help but getting through the ones we have would be faster. >> as someone who has to make policyal recommendations and counsel patients, tough one. doesn't sell well. sympathize with that. >> it's not consistent with the urge to fix things, but i think seriously if you watch the day- to-day progress, we have come over the top and are coming down and we are representative of the industry. this will get done. and the key is just to do it right for the consumer and in an everyone net i can, clear way, but adding more to it actually lengthens the process.
>> can i turn to a somewhat different topic which is credit availability? so you made it clear in the speech that we can't go back to the go-go days of lending that we saw in the middle of the last decade. i completely agree with that. but speaking of things overshooting, we saw the credit availablity pendulum swing too far in the direction of the financial crisis and subsequently we've seen credit availability get better for some types of loans as the economy has gotten better, but my sense is, and looking at the national data that we haven't seen that much improvement in credit able when it comes to mortgages for home purchase, and that's for the nation as a whole, is it true and if so, can you help us understand why? nowell, this t, there's question that if you think about the mortgage market as kind of having a constant level what is put on top of that is a lot of activity and it's gone
and should be gone, so there always was a large portion of the mortgage market that went through a very standard so to speak underwriting process and speeding up the pace of mortgages and refinancing so that's why you had the annual term if you take the percentage of mortgages that refunded in the year you reached 30% or 40%. it's come down to 30 or 40%. should probably be in a lower earning. but the programs are there. the process is slow. but if you think about it from the lending community, we made lower mortgage threatens to many said make a mortgage loan and i want it then in 2012 you're saying i don't want it. so these things have to be buttoned up. and our error rate is very low because we have to protect the integrity of the assets for a period of time which are way
beyond the views of what went wrong 0 years down road, so i don't think this is going to change but it's not inherently a bad thing but then does money have low or moderate programs? we have some origination in those programs and f.h.a. has made programs available for first-time buyers we have to be careful about how much we do with that, but the biggest impact is underwriters went from those processes so that's the frustrating part for the american consumer and it's frustrating for me because we can't get our loans closed fast enough for our customers and added 5,000 people over 0-18 months to increase our ability to do mortgages and we're still not doing as well as we should so it's really underwriting applied to the more traditional
mortgages and i'm in the sure it's time to pull back on that yet. >> so picking up on that lastal thought, i understand the reasons for that and suspect this is credit availability is part of what's behind the weak household formation although i completely agree that the conditions and joblessness is a major force there. but thank you feel this is a new normal or something that will change as the economy gets better? >> well one of the -- one of your colleagues and i had a conversation back, and your team has led on this, almost go city bicity and poplations trends and see how they connect because this is not aning a get america question. we had many present from 140 markets around america and
dallas doesn't know what detroit's talking about. the population's going. or houston the impact. it's just not in their thought process to think that they have a problem with unemployment or housing. detroit, columbus, other places have it. parts of massachusetts have it. other parts of massachusetts don't. so i think this has to be very localized and figure out how you solve that. untils going to be tight we get rules figured out and then you bring in private capital. but i'm not sure that's alltogether a bad thing but i think we have a lot more granular by-city or by-community to figure out what the answer should be. >> turning now to the customer relationship and how it's changing in response to the very dramatic developments in the bank and developments over the last several years so, first of all, i was delighted to hear
about your efforts regarding home buyer -- over the past few years people need to understand what they are getting into when they make this enormous commitment but let me ask you about the change in the different potential change. it was reported a couple weeks ago in one news article that i saw that the bank was backing off of a plan to impose new fees under checking accounts in under certain circumstances, so i was curious is the report right and what shulled we make of it? >> i'm not sure we read it but let me tell you what we do. so if you think about, we think of our, in our general retail business which is a big business in america, we have about 30 million checking holders checking account holders so starting a number of years ago we started to look at the combination of the economy and
people's behaviors and the new devices really changed things, so we started to figure out that we had to figure out a different way to relate to americans and income earners as a way to provide services fair to our shareholders and so we dropped the overdraft fees in debit cards and went to more transparency. we have lowered that and we have been managing that dialogue figuring out the right way to hand that. then entered the smartphone which changes this dynamic dramatically which is yoo pick with a 'tis and available for low cost and so we're seeing that as an interesting thing and seeing customer behavior change and so we're trying to develop programs that help people have great access to banking services. do000 a.t.m.'s etc. but to it in a way that we can provide great service with the realities of things available so there's a
lot of talk about what we're doing and not doing but i can tell you we have a great transaction for the core and what we're looking for is what's the model serving forward? and what we're seeing is 70,000 more mobile bank users per week so 20 million texts go out to our customers saying your balance is low. make sure you don't overdraft. all this put together is a tremendous level to serve customers traditionally with branches and a.t.m.'s, it was at a higher cost and now you can provide it at a lower cost and you don't have to charge them penalty fees. >> we have time now for a few
questions from the audience so if i can just ask you state who you are and who you are with and also if you could just keep your question concise so we can get to as many questions as possible. so with that i think i have someone walking around with microphones? is that is that right yes. so let's take this question right here in the first row. >> i'm with the national associations of real estate professional. you indicated in your presentation or implied that a big part of the forclosure problem was admitting borrowers could not afford the -- according to "the wall street journal" at the peak of the housing boom as many as 60% of ever or more actually qualified for prime loans, that is loans they could have afforded. part of my question is what are we going to do to prevent that from occurring?
last year according to the census bureau, there was a net increase of about 200,000 new owner-up aed households, 80% of which went to hispanic homeowners and other minorities. at the same time there was a net increase of thousands of units, hundreds of thousands of other population groups including whites. what are the implications to the bank of america to these demographic changes and developments? >> we have, for at least a decade, maybe more, we look at our customers and customer- driven and think of us? los angeles or chicago or houston. so as a customer demographics change our plans change we have counseling and branches that speak multiple languages so we have been a leader in continuing ways to make the dialogue to our customers more
nateive to them, for lack of a better term, and that's important. i think when you go to housing, the groups you represent are fast-growing so the half million households will have a higher percentage of the hispanic community, which is great. it's a population of america, that's what makes america terrific, so serving them i don't think is that different than serving decades ago. you can't get the dialogue going in terms of what to do. there's not a decision point. so it doesn't always end up in forclosure but the decision ends up with -- there were about 20,000 properties in a status that almost rolled over.
so the addition is we have 9,000 or so with uncertainty and how the reposition those houses, the 900,000 is a tough challenge, so we work with all kinds of community groups around the country. so we have been trying to enlist them to help us, because comfort you give your constituencies helps us. how do we get through it? and believe me, we need everybody's help here, because borrowers have to trust the process. so i don't know if that answers all your questions, but that's kind of how we think about it. >> thanks for your overview on the housing market.
on the point of what is right for mortgages, if you look at fannie and frethy's mortgage- backed securities, it's pretty much in historical range going back to 1990. and f.h.a. -- three there's been virtually -- given those facts, what would you say is the right percentage of the market, f.h.a. and g.s.e.'s and whatever forms should emerge, what's the right balance if they are currently in the g.s.e.'s where they have been since 1990? >> there's philosophical question. if you could do it all --
conceptionnally, the practical reality is that if you think about the mortgage debt outstanding, $10 trillion or that, 5 trillion, pick a number like that. and you think of all the -- you cannot engines through the banks, and by the way the nature of the asset is such that banks can't hold it easily but then you have 10%-15% foreign ownership of the g.s.e.'s so i think in the near term there's no practical solution other than to continue to participate in the governments, because the reality is with uncertainty in the process or asset is, do you think people who don't know america or outside america can actually invest? and we need their liquidity to balance long-term but i think the private label market will be there.
we shouldn't have quite went wrong with the private label market around the c.e.o.'s. it had nothing to do with the private label securities market but the actual underlying notes have been going on for i guess 30 years now that the -- that they are there and true and the investment of others, i think it can get there. that would require more sustainability and tried and true underwriting, so i think you need to bring the government down and private label down dramatically. i think it will go -- will it go away? maybe, but i think that's a decade or two transition not a five-year transition, because the amount of investment capital to sustain the housing market isn't going to come without liquidity. i don't want to say a certain
percentage because people will then try to draw a line and get there but clearly the goal should be the least amount of support you need for the goal you want and i think the goal is specific enough in the united states that in an economy that used to diversify growth which was going on in the mid 2000s, you've kind of got it where you want it so it should ease down. i think it should come down a small amount but the question is how much and when? >> i know you have to run to your meetings but i'm going to take a last question as a follow-up, so i see your point that an abrupt change in the housing finance system would be a bad thing given how fragile the economic recovery is right now, but we're not really talking about what the new system is going to be looking at.
doesn't mean wonderful to go to the new system but we're not putting the framework out there. is that harder for you guys or make it harder to device the dwishese the strategy you have for lending? >> i think if we can get with the cpfb, with the director and others and the qrqrm, the basic, everybody has had their perfect answer as to a whole bunch of thing. if we could get that rationalized you could see the various points form in private capital coming back in. so i think that's the near-term. longer term, secretary geithner put out a proposal 17 months ago, 18 months ago, i think that's lost behind. but i think then the near-term need so sort of finish the discussion around the core aspects of dodge frank and when you get that done and have that viewpoint then i think it's time
to have a discussion but a lot of the discussion -- frankly a lot of debates around the end points narrows on the end scheme of the government being an ensurer of way out tail risks, that's a little bit like every other -- the answer is not that different, the question is between here and there how to make the transition so i think we need clarity on these straight-forward set of topics not straight-set of outcomes. then a three or four-year discussion to get it right. potentially 13, 14, are 15, and then you start to implement it. but you have to give a lot of warning to americans and the markets because you can't change this overnight, because you don't want confidence to go backwards because of this.
so even a debate about mortgage -- the outcome may be far more serious than the outcome of the change. but part of it is just to let this ease into the psychology of the american buyer and so they can adjust their viewpoints. >> that sets up nicely with the pabble, because i think they will be grappling with the new system and what it will look like. before you leave i want to say to folks, brian is going to leave and then we are going to have the panelists hop up on stage in about 60 seconds, so if we can kind of get you to stay in your seats until that happens, that would be terrific but before that i want to thank you, brian. i know you have a busy schedule and we appreciate you coming here and telling us what's going on with the bank. >> thank you for sponsoring this discussion and thank you for your participation.
>> thank you. [applause] >> welcome on behalf of all the panelists here. i want to thank the brookings institution for having us here and discussing what i believe is one of the most important issues going forward. i cover cnbc. i cover real estate and mostly what all these panelists talk about so we're going to give each a chance to do a short presentation and then give the
audience to ask questions as well. so we will start with this side. >> thank you. >> thank you for the chance to be here today. the topic is what's the future for homeownership and there's really two answers to that. what will be the future and what should be the future? turns out what should be the future, i want to echo what brian moynihan said, the pace of the united states. i think that's fundamental to the degree to which we recover in housing markets across the country. i have been to a variety of different markets for events 20 sort of look at this. sacramento, phoenix, columbus and the nature of the recovery differs greatly but the pattern that emerges is one in which the broader based economies recover better than those which are narrow and the reports cannot be overstated. getsecond which doesn't
talked about as much which i think is very important to the future is immigration which is central and one of the underserved policy topics in the united states. the native-born population of the u.s. doesn't have replacement fertility rates so all future population growths comes from what we choose and this is the issue over the longer term, so those things strike me as central as to how it will work out. seems to me we have a couple things. first is to recognize it is time to look forward. this crisis began years ago now,
and i was once in the camp of designing very clever policies, i promise you they were very clever. al solved all these problems, but more policy and inknow vacation and programs and intervention i think is now making it too difficult to figure out what the rules are and move forward. the example is the basil three zero courts and the implementation. if you look at the credit implications of those rules verses normal lending circa 2001. we're on track to thrive for 25% fewer mortgages then if we have the standard for 2001. it is happening right now as we go forward. what are we going to do? providing shelter for americans should be the central focus.
those in need of shelter should have opportunity for that. i believe there are two things that will end up being true. americans will not give up their deep love of the 30-year fixed mortgage. maybe second behind children. we know that the model is broken and we have to, but something different. whether there has to be a friend end subsidy. it may turn out that that is true in a weak housing markets. do not subsidize in an open-ended fashion.
not toward those who become heavily indebted. let's have something that rewards equity investments. that is briefly the lay of the land. >> my name is janis bowdler. my brief opening comments -- demographics in this country are changing and that has huge implications for the housing policy and our service and our policy. those borrowers don't just look different. they have different credit profiles from what we have seen in earlier generations.
we know how to do it sustainable home ownership right. let me touch on each of these issues. the demographics issue already came up. let me put a fine point on this. 70% of household growth will be driven by households of color. half of all first-time home buyers by 2020 will be latino. there is no one ethnicity that dominates currently. we are seeing a dramatic shift in our population. if the systems cannot accommodate that, we will end up
with lopsided policy. very different profiles. we have to think about meeting these households where they are at. latino families have seen double-digit unemployment for a couple of years now. latino families lost two-thirds of their wealth because of a decline of home values. that's a different profile. think about what they will meet when they enter the market looking for a home. think about where our students are. i saw a report that student loan debt is going up $3,000 a second.
they are overleveraged already. their credit profiles will be extremely different. do we just shrink the market or think creatively about how to make sure these borrowers can be accommodated. that brings me to my last point, which is sustainable home ownership. our conversations have been dominated by the responsible borrower. we make sure only responsible borrowers are able to get a mortgage. that question implies the run-up
to the crisis, we can debate the causes later until we are blue in the face. it implies a simplistic answer to the crisis. that ignores the systemic issues that we were dealing with and makes it a more simplistic answer then will we know is a complex situation. the right question is, how do we take those models and get them to scale so that we can build the most inclusive market possible? so they are able to get a loan. we are not talk about fancy and wildly creative things. we are talking about 30 year fixed mortgages.
we have seen that it works. it only behooves us to grow the pie. as we think about our immigration policy, we need to think domestically what is going on with immigration debate. if we see 11 million people in this country earned a path to citizenship, that will have serious implications as housers. we need to be thinking about that as well. tom? >> he has slides. >> i have a few slides i want to run through. my name is tom deutsch and i'm with the american securitization
forum. i want to put in context where we are in terms of credit availability. just to provide some backdrop of where capital comes outside the banking sector. think about mortgage lending. you always do with the local banker. those days have been gone for a while. most of the credit availability does not come to the banking sector. the capital does not come from bank of america's pockets. knows is coming out of fannie or freddie or fha.
this provides a backdrop of global securitization around the world. the u.s. is a heavy user of credit products. europe is a distant second. it gives you a backdrop of the credit availability. this gives you some backdrop that the markets in the united states have come back to an extent if you look at the various asset classes. not as many people buying cars. the market is functioning. most of the student loans are going under the government's
balance sheet. different loan obligations -- this data is a little bit old. $50 billion and that market is rapidly returning. this is the slide that everybody talks about, the dramatic change in how mortgage credit is made in the united states over the past six years. securitization of volumes have gone up by $300 billion in the past six years. private credit is a huge volume.
$700 billion put through the private label security system. $22 billion is overstating it. of all the slides i have, this is the most telling about where the credit is coming from. it's coming to fannie and freddie and fha. 90% of loans are effectively being guaranteed by the government. it is not just a u.s. phenomenon. europe does not use a government-backing program. there are some there is backing stithy banking sector -- there
are some -- much is retained on their own balance sheet and their pledge to the european central bank. that's not fannie and freddie-like but still has a government backdrop. japan, australia, rbs is part of their markets. that gets you back to where the u.s. is now. you have an outstanding mortgage stock in the united states. some of this data is a little bit dated from 2012. but it gives you some snapshots about where the delinquencies are.
something like a quarter have an underwater nature to the mortgage. there are still some challenges outstanding in the markets. where is the credit going to come back into the system outside of the fanny-freddie model? there are lots of calls. you hear from jeb hensarling. fannie and freddie and the fha have to be drawn back in some way. how do you do that? this provides at least some of the basic high points of where is it that the private capital is going to come from. if you have a pension fund, you put that money into the u.s.
housing stock market. do you lend that to borrower? do you want to loan money to people at 4% to buy a house? the government may be doing that. the private markets say they will put the money somewhere else. kind of japanese product. the liquidity it moves pretty quickly. you'll start seeing the private capital come back in. that creates more risk for the money you put back into the market.
that's a quick overshot. think about the 2006 volume. how do you bring some of that back? do we want $200 billion? $300 billion? >> i want to build on some of the things that others have said already. a couple of additional points about why we should not settle should 10% less than 2001 level mortgage market. we do run the risk of facing future policy on a very strange
last eight years and we should not be doing that. leading beside the aspirational issues, if we do not keep the housing market ladder robust, it becomes difficult for people to move up and for people to move out. that has significant effects on the economy. the boomers are going to release somewhere between 10.5 million and 11 million homes in the next 10 years. who is going to buy those homes?
if we don't have a system to buy those homes, it is going to be a difficult transition. it is different in different locations. an interesting implication is for years we have talked about the importance and this was a critical element during the impression when fannie was created, the notion of having a housing market that was the same all across the country. now we are recognizing we have different markets. what does that mean for the housing policy? that is a huge question. i want to talk about rental. one reason we ended up with a
push into home ownership -- the crazy boom of the early 2000's was heavily a refi boom. we were doing rentals so badly. it is time to recognize that and to fix that. for a third of american households are renters. million renters will added in 2011. this is an even greater percentage at the lower ends.
vacancy rates could decrease to 4%. the number of low-income renters has or grown but we have lost 12% of the low rent housing units. we are due to lose another 900,000. we need to fix this problem as well as the home ownership problem. they are two parts of the same coin. almost everybody rents before they own and many people rent after they own. i have four points. we have to fix the simple availability of a lower rent.
we have to stop the continuing loss of affordable rental units to conversion of demolition. we have to figure out how to have consistent financing for non luxury and smaller buildings, which is work a huge percentage of the affordable stock is. we to think about some alternatives between rental and ownership so that you can have shelter and some appreciation but you do not as acela have to take on the full loan. >> brian mentioned resetting policy. we have a tradition of promoting home ownership at the policy level. google is a powerful thing.
you can fine speeches that are indistinguishable from each other. a home was a man's place that we needed to support after the 1990's. it was bipartisan. "we strengthen our economy and build better citizens," said president clinton. some of the statements are overstated on the importance of home ownership. it peaked in the middle of the last decade. some countries have similar home
ownership rates than we do but doesn't subsidize as heavily. other countries have lower rates. it is not a key ingredient for a strong economy contra to the last hundred years of speeches would suggest. it is how we should apportion the subsidies between home ownership and rentership. i want to focus on the tax side. that's the biggest source for subsidies. the mortgage deduction was about $80 billion a year. the exclusion of capital gains
was about $20 billion. that is a significant amount of revenue. there is scope and need for rethinking the distribution of our net subsidies across home ownership and renting. you look for a market failure and there are some in the literature. there is some evidence that home ownership increases tenure and investment in local goods. i would offer some counterpoints to this.
it is difficult to know whether home ownership is leading to these positive outcomes. it is a difficult thing to know. it does cut both ways. this was alluded to before. it could make you less mobile. that suffers from the same problem as the counter studies but it does cut both ways. if we think we should be leading into home ownership, we are not going about it the right way. we have a very clunky policy. is subsidizing bigger homes and
more energy used. there are better ways to do it. there are a lot of plants on the table -- there are a lot of plans on the table. >> thank you. we will take some questions now. the answers tight -- keep the answer is tight. i want to get back to the point -- if you take financial security out of the equation and that, people are getting into a home as an investment, you begin to talk about subsidies. when you talk about getting rid
of subsidies, do you believe the fed's purchases are a subsidy and a subsidy that should continue or go away? >> i think they are a subsidy. the goal was to have a channel to expand economic activity in the united states. i would argue it's been minimally successful. it's hard to do and it will signal success. it would mean that we're growing. that will happen once the fiscal side gets going. let us take a moment to pray. >> should there be more -- we talk about renter nation. now the attitude of the newer
generation is that renting makes it more affordable with less risk involved. then why bother? do we deceit rental subsidies -- do we need to see rental subsidies? >> take a look good the numbers. it will cost about $131 billion in 2012. that's more than all of the hud outlays. they were $40 billion. which is need to equalize some of the stuff we are doing already. i would get push back on this from doug.
the only part of the panoply of programs that is producing rental housing for lower income families is the low-income tax credit. >> you are so wrong. >> new construction is down. it is producing it heavily in terms of rehab and renovation. an awful lot of that stuff is in markets where if the use restrictions are allowed to expire, it will be lost for low-income families. another piece that got lost about investor owners of small properties is that one to
four-family buildings that have relied of rental units in them were always financed as single-family homes. it is hard to get financing for that kind of housing now. a lot of it needs to be rehabilitated or refinanced. we need to figure out how we can effectively finance those small buildings. it is up to 50. that is not a subsidy but paying attention to how the financing system affects rental, and rental that is not luxury rental.
>> it will be largely hispanic. during the housing boom, hispanics and blacks were targeted by mortgage lenders and in some cases terribly fraudulently targeted. do you believe the safeguards put in place are sufficient going forward to serve the population that is coming in? >> i think dodd-frank did a great job of taking care of the retail abuses that we saw. i think we will see a better market going forward. how to make sure good products are available. we still need to make sure there is enough liquidity to make good products available and enough incentive for those good lenders to market and locate in the neighborhoods where communities of color are.
predatory lenders moved in to fill a vacuum where could it lenders were not serving. we need to make sure the housing finance system makes good products acceptable -- accessible going forward. >> counseling is critical. it's been almost entirely supported by a combination of the government and philanthropy. the lenders and investors benefit also. the system has to be a lot bigger. >> we are getting the wrap take questions from the audience. this gentle man right here raising his hand.
>> thank you. i was intrigued by the presentation because he made the responsibility of everybody else and not the financial institutions. this crisis did not have to happen. to many people were incentivize the wrong way. nobody had any skin in the game. if we didn't go back to the past, will happen again. i would like people to address what the financial institutions can do to rectify the future. have skin in the game.
it was like musical chairs. >> there is massive regulatory change in the wake of the crisis. the talk about dodd-frank. there'll be two major landmark pieces of legislation, "qualified mortgage." does the borrower have the ability to repay the mortgage? that is the simple question. how do you measure that? you can put in a simple metric. there is some rumors that may end up into the rule.
the borrowers have all kinds of varying characteristics. there could be 25% debt to income ratios. they may have a- to income ratio -- a debt-to-income of 100%. there is a challenge to create the rule. the people who invest that money want to know that we have made what is a qualified mortgage. they do not want to take the risk it turns out not. >> should never buy have a stake in it? people were just selling these loans and nobody had a stake in it.
>> that is part of the second regulation. >> the question about what can banks do. i wish he spent more time on that. bank of america has made a commitment to do principal correction on the most amount of portfolio that they can. they can do principal reduction on loans owned by fannie and freddie. for those loans that they can,
they are taking a hard look. i thought he said the average was about 150,000. that is much more than we're seeing other banks do. the commitment is more than other banks are doing and they deserve credit for that. we have 11 million home owners that are underwater. >> i served on the financial crisis inquiry panel. irish know when to adopt simplistic explanations of what went on. it took a lot of factors to produce the perfect storm. i encourage you to read "my descent." >> what are the conversations that you are having with the
banking industry and local and state governments in create environments with regard to affordable housing? why are we looking to places like japan with multi-family units and very affordable? >> i am the eco friendly -- on the eco friendly units, to the extent we're doing new construction at the lower end, there has been a move by towards much greener buildings and a recognition that you can keep the operating cost down and you can make an enormous dent in the affordability. in terms of interest of the
governments in affordable housing, i think at the state and local level, there is a huge interest. the places that have been hardest hit by the housing problem have been hardest hit in their pocketbooks. these are the places where they are having a problem paying police and firefighters as well as taking care of huge quantities of vacant buildings. >> we have time for one more question. >> it seems that there are many forms of stimulus for the housing bubble. the speaker talked about the government subsidies in forms of taxes and property tax deduction. the fiscal cliff is an opportunity -- there hasn't been enough discussion of an intermediate discussion
supporting home ownership and keeping the deduction for your first home and not your second and not the one you are speculating to flip on. that would seem an easy solution in this crisis, to eliminate the tax subsidies for the home buying beyond the first family home. >> there are such proposals, roughly similar reforms for capping a it $1 million on principle and capping it at 5 letter thousand dollars -- $500,000. limits the size of the mortgage. it did from a deduction to a credit. that probably cut it in half and
should sit on the distribution to the lower end of the income distribution. it doesn't help you if you do not itemize or if you're in the lower tax brackets. you kind of shifted down and make it less regressive. they are out there. whether it passes will be politically challenging. any attempt might be an across- the-board limit on deductions, which has been proposed in different flavors. >> that is all the time we have but i would like to thank all the panelists. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]
>> the elementary school is the scene of the latest mass shooting. a gunman killed 26 people, including 20 children. authorities say the gunman then killed himself and another person was found it elsewhere. president obama came out and made a statement on today's shooting. we will show you tthat tonight here at 8:00 p.m. on c- span. ♪>> they are just as good as
gold. >> as we were starting to see people coming out and talk about this experience and had no words for other hand adolescence and growing up people were starting to stand back and say, this is not a normal part of growing up. this is not a normal right of passage. there was a moment where there was a possibility for change. the director and i decided to start the film out of that feeling that voices were bubbling up to say, this is not something we can accept any more as a normal part of our culture. >> cynthia lowen has fallen of her film by gathering up
personal stories together in "bully." here more saturday night at 10:00 on "after words." >> my inspiration was the idea that i wanted to explain how totalitarianism happens. we know the story of the cold war. we have seen the archives that e relationships.recent tr we know the main events from our point of view. i wanted to show from a different angle, from the ground up, what it felt like to be one of the people who were subjected to this system. how do people make choices in that system and how they reacted in behavior. one of the things that has happened since 1989 is the region where used to call eastern europe has become
differentiated. it is no longer -- not much in common with another. >> war with paula surprise winner and applebaum -- paul surprise winner anne applebaum. son and heir if caught. the house of representatives is back in session monday at 2:00 p.m. eastern. members may come up with a compromise to allow a conference committee to finalize the defense programs bill for next year. they passed the defense policy bill next week -- last week. negotiations continue on preventing the fiscal cliff from taking effect january. the senate is back on monday live on our companion network c- span 2.
next week judicial nominations in the u.s. senate. next, a look at cybersecurity threats and ways the u.s. can address challenges. we will hear remarks from house intelligence committee chairman mike rogers and former homeland security secretary michael mccaul. from george washington university, this is one hour and 45 minutes. >> our initiative will be chaired by a public servant with a track record of leadership in the field of homeland security, secretary michael chertoff. the need to secure critical infrastructure, national security and permission, and our financial systems is a challenge facing the u.s. and international community. the issue as it must be a priority for congress and the
administration and is recognized as a priority for the private sector as well. thanks to its location in the heart of our nation's capital, george washington is at the epicenter of cybersecurity policy maker and has been called to play a role in this effort. our experts in the cyber field have been invited to testify in congress on the challenge and on ways of meeting it. the initiative will raise the level of our involvement, bringing together our expertise from across the university to address a problem that cannot be solved with the resources of any single discipline. this enables us to address a wide range of issues including international and national security, economic competitiveness, privacy concerns and civil liberties. the initiative will combine the inside of faculties and our schools of engineering, international affairs, business,
law, professional studies, and education -- initial studies and education and others. sears will coordinate this campus wide effort. i would like to thank trusty richard knop who has agreed to and haschair has the played a key role in connecting our efforts to important part of the corporate sector. i'd like to thank bob rose. i can think of no better way to launch this initiative and with the speakers we have assembled here today. our panelists, michael mccaul, and mike rogers, chairman of the house permanent select committee on intelligence.
white house cybersecurity coordinator howard schmidt and chairman and ceo of boston properties, editor in chief of "u.s. news and world report," owner and publisher of "the new york daily news." our first speaker is michael chertoff. it would be difficult to imagine anyone better suited to head the cybersecurity initiative than secretary chertoff. as secretary of homeland security from 2005 until 2009, he was responsible for implementing immigration policy, homeland security regulation, and spearheading a national cybersecurity effort.
from 2003 until 2005, he served as a federal judge at the u.s. court of appeals for the third circuit. from 2001 until 2003, he was an assistant attorney general of the u.s. as chairman of the board of directors of bae systems, he is an advocate for cybersecurity and the private sector. please welcome secretary michael chertoff. [applause] >> thank you for that kind introduction. it is great to be here at the launch of this initiative. i am proud to work with a number of distinguished people here in what will be a very signal effort to elevate and broaden the way in which we look at cybersecurity. it is good to see friends who are interested in this area. it is a tribute to this effort
that we have a good turnout including a distinguished set of speakers. it does not take a rocket science to recognize that cybersecurity is a major and challenging issue and is continuing to occupy an increasing level of attention on the part of national security officials and policy makers. and people in the business community. what is challenging in the cybersecurity area and different from what we see in physical security is the domain is not limited to a foreign battlefield or a law enforcement effort. it involves a conflict and struggle that is in a network of all of our homes and businesses that spans public and private activity. all of us are enlisted in the effort on cybersecurity.
it is not something that we can expect other people to do. the networks, infrastructure, physical elements of our network world and the people are shared between the public and private sector. more than any other security challenge to get this right we have to have a public-private partnership. we have to have the ability to achieve unity of peppered across all the elements of national government. it is important that gw has taken that kind of integrated approach to the effort that is being launched today. the idea is not to simply treat it as an isolated engineering problem but to bring together business lot engineering policy -- law, engineering policy. that is the spirit within we need to address the problem on a national basis. all of our panelists and
speakers will talk about some the mention of how we achieve this public-private partnership as we do with the challenges of cybersecurity in the years to come. but me frame the discussion briefly. -- let me try to frame the discussion briefly. there is no doubt that cybersecurity is not just a question of a threat but an actual ongoing challenge we face every day. on a daily basis you will see another description of an attack or threatened attack. in the last week, there have been threats about service attacks against our major financial institutions, something we have seen of the past several months. secretary leon panetta gave a speech where he talked about a destructive attack that took place against 30,000 hard
drives. that was an attack that was not merely about interfering with the operation of a network for an amount of time. it was designed to damage and destroy the network. the u.s. government has issued reports that described billions of dollars of intellectual property that are being stolen on a regular basis by nation states and enterprises. using cyber among other means as a way of penetrating business plans. this is something that needs to occupy and the occupied the attention of serious people in government and business regularly. what are the kinds of things we worry about? what is at stake? if we are worried about jobs and a competitive environment in a globalized world, we need to make sure we protect our enter
lecturer property and of a sensitive business plans are not revealed. if we want to make sure our critical infrastructure operates, we need to make sure we protect that critical infrastructure by hardening against physical attacks and cyber attacks. look at the case, the ability to put destructive tools in hard drives for servers that may occur in saudi arabia can be translated into similar types of attacks in the u.s. or against our friends overseas. secretary panetta talked about the fact. it is unclassified that from time to time we find on our own networks our water systems and transport systems malicious code, which is designed to be destructive in those systems. this is not a fear medical
matter. -- theoretical matter. it is a cuban missile crisis and cyber. -- in cyber. is in servers on the u.s. we have got to deal with these issues. one of the challenges is how to make this a sensible not just to technical people but to the ceo's and members of the boards of directors and people who are responsible for most of the network activity in the private sector. it has been a challenge to get them engaged and enlisted in dealing with the issue of security and to focus on investments that need to be made and the steps to take to reduce the risks to our critical
infrastructure from cyber attacks. one of the main challenges is this -- for twoo long is has been for technical experts. it is too easy for ceo's to say, i will give it to my chief technical officer and my chief information security officer. it is this geek stuff. it is technical stuff. i can go on to something else. if there is one lesson we can teach, it is that this is not a technical problem. there is a technical to mention to secure our networks. you need to have governance decisions, protocol decisions that are not technical but go to
the essence of how we govern ourselves and conduct our activities. these are the essence of what leadership in the private and public sector need to focus on. it cannot be relegated to engineers. it has to consider the legal dimensions in which we operate. what are the rules that we can use when we investigate intrusions? what are the rules that we use if we are engaged in cyber conflict? it requires business understand ing. and a willingness to trade off. understand when we have to let convenience give away to security and insecurity has to be modulated in the interest of efficiency. these are disciplined some require a broadened view, the approach being taken here. i will give you a concrete example. in the last few years, the
architecture and the kind of challenges we face in cybersecurity have changed with the rise of smartphones in the cloud. the idea of a perimeter of protection of fear assestts, which was never a total solution, receives even further into the -- received for the into the background because some much occurs wirelessly. people want to bring their own device to work. how do you deal with this? it requires decisions about what you tell your employees with the can and cannot do. what can access at work? do they have to use different devices? what are the restrictions? what are the encryption requirements? you cannot understand the challenges unless you look at it from a business, legal, an engineering standpoint. this is an opportunity to send that message across our elements
of critical infrastructure and our public and private sector. garment has an important role to play in this public-private partnership. congress has begun the process of working on important legislation that would help build some of these issues. there are three things we need to be concerned about where government can play a role. when is information sharing. in the old days during the cold war, the way we detected national security threats was the use of radar or satellite to see if a missile was launched or an airplane took off. in cyberspace, we need an understanding of the kinds of attacks that are out there and the malware out there in the toll free have to be on the lookout for. -- and the tools we have to be on the look out for.
the worst thing is to let the adversary pick the targets off one-of-a-kind with each target unaware of what happened. the ability to share information, bringing to bear our intelligence community, what we see from a technical standpoint in the government. with the private sector experiences daily. that is pivotal in reducing the risk of successful attacks. we can make sure that these attack is identified and give warning across a series of domains the less effective that attack will be the second time. we will be reducing the risk. how do we promote better cybersecurity and cyber hygiene? when we recognize -- government can be helpful. allow people to understand a way
in which they can improve their security without being heavy handed, which does not work in an environment where the tools and responses are changing so rapidly that no for a good story structure can keep up if you try to mandate individual prescriptions about how you engage in cybersecurity. reward and protect those who are doing the work to upgrade the security. this was in incite congress had a decade ago in we're dealing with post-9/11 terrorism problems and the safety act was passed. the design was to create a legal framework for those people who were investing in counterterrorism technology and process to give them a liability protection that would intensify its -- incentivize them. that kind of approach to
liability protectio andn is important. all of the elements are floating in congress. there is a real interest. we need to get moving. the white house has indicated -- with the white house can do it is less than what congress can do. it is not a substitute for legislation. time is a wasting. there are things the executive branch is proposing to do and can do that will be important. you need to have unity of effort. have a single point of congress -- contact so we are not fumbling around with a telephone directory won a cyber attack is occurring. steps are being taken to move in that direction.
we need to accelerate them. the private sector needs to have a way to connect with the government in real-time, not using snail mail or the traditional meeting method. we need to unify with in the government all the elements of national power. the administration's proposal is to have at least for the private sector putting aside the defense industrial base to have dhs the the out with face in the principal face for the private sector. when i was in office, that was the plan. make sure what is brought to the table is not just dhs capabilities but the capabilities of the department of defense and the intelligence community as well as forensic and investigative capabilities of the fbi, the secret service, and other law enforcement agencies. all of these things have to be
deployed. this is not an area where turf fighting may be welcome. but the executive department can do is look to remove some of the legal obstacles that have interfered with information sharing. some require legislative action. some will require consideration of what the u.s. doctrine is when you have a cyber attack. how do we respond to it? what is out of bounds? there has been discussion and work on this. it needs to be brought to resolution quickly. we need to have a publicly declared doctrine about how we treat various kinds of attacks. make it clear if this is what our view will be bad a
destructive physical attack against critical infrastructure that cost lives or economic damage, whether it comes by cyber or land, sea, or air, will be viewed as an act of war against the u.s. we need to make it clear and public. otherwise, there is a gross potential for people to miss understand what our position would be. that is how wars get out of hand. this is not different from the exercise the u.s. took in the early 1950's when eisenhower convened projects allow iran to talk about what our posture would be -- project solarium to talk about what our posture would be. i am delighted you are here today. i look forward to working with people here withgw and others with in the government.
thank you very much. [applause] good morning. let me say that we have an embarrassment of riches in terms of the folks on this panel. i cannot ask for a more informed and more pro active and active group than those joining us here today. we will start with brief remarks from two members who are the lead voices on national security.
specifically on cyber-related issues. we will start with congressman mike rogers, who championed in a bipartisan way the cyber intelligence information sharing and protection act, which passed congress but was not taken up by the senate. congressman rogers comes to us as an fbi agent and prior to that was an officer in the army reserves. he brings expertise. he is one of the lead voices from the hill that plays an instrumental role in passing legislation. we are delighted to have congressman mccaul. he was recently appointed the new chairman of the house homeland security committee, which in addition to the two
committees that drive cyber- related issues. he knows his national security issues. he was a former u.s. attorney in texas for national security and counterterrorism. he was also deputy attorney general for texas. two wonderful individuals, both of whom have made cyber priorities not only for themselves but for their commoditi committees. we will have comments from a robust panel. we will hear from one of the most successful businessmen you will ever meet. he is a news van. he is the editor in chief and publisher of "u.s. news and world report," an architect.
he has more academic affiliations and anyone i know, including harvard, including mcgill. you name it, he has done it. he has chaired a bipartisan policy center an initiative on cybersecurity. it brings a lot to bear in terms of the need for bipartisan cooperation. we will hear briefly from howard schmidt, who does not need an introduction. we have had the privilege of working together for many years in the bush white house. he served as president obama cyber czar. then we will hear from a member of our offense recommit the at gw. he is also a friend and colleague. his work at northrop grumman
brings the science to the art of the cyber-related matters that need to be addressed. we have the program manager for the information sharing environment. he has done yeoman's work in terms of information sharing on a homeland security counterterrorism issues. someone i have had the privilege to work with, a trustee, richard knop, a highly successful businessman and chairman of the external advisory committee of the gw cybersecurity initiative. we would get comments from the group. arrest of the conversational -- the rest will be conversational.
>> i was skeptical we would get anyone on the college campus at 8:00 a.m.. maybe a little of both in the audience. thank you for the opportunity to be here. you probably know what the cyber threat is. as chairman of the intelligence community, there are a lot of things that keep me up at night. it is the largest threat to our economic, political, and governance prosperity that we are not prepared for as we move forward. 95% of all networks are private. 5% our government. the government is conducting activities in the intelligence world to find out what bad guys are trying to do. we apply what we learn to the government networks to try to protect those networks. we are doing a decent job. those 95% of networks out there
are fairly exposed to a growing threat in cybersecurity. it is growing every year. you have your low-level criminal activity. you have organized criminal activity primarily from eastern european nations where you have a high level of sophistication and targeting for larger thefts. that credit card in your wallet today will hit 300,000 times today by organized criminal activity. they cannot stop it all. there is a new threat where they can intercept your transaction going to the bank and the banks' response to you, which would decrease their -- the feed their security protocol -- defeat their
security protocol. you have espionage. it is at an unprecedented pace. nation states like china and russia and others are stealing intellectual property at a rate that will be crippling for the next generation. i mean crippling. there is one company in the country that can contribute to intellectual property theft 20,000 manufacturing jobs. it happens every day. there are two companies left -- those that have been hacked and are trying to do something about it and those who do not know. that is all that is left. you see a nation state investing billions of their capital in their military and intelligence services to still commercial property and real purpose it. we have never seen anything like
it. it is happening every day. we have the last part of that. itis the nation's they using to attack and denial of service for prepping the battlefield. military nation states have incorporated into military planning prepping the battlefield for several attacks. the russians went into georgia. they prepped the battlefield. they used to send in the bombers and artillery in the troops. now you start with cyber attacks, denial of service. the gas stations will not work. you cannot get food. then the troops moved in. it is a part of every military major state of around the world. it is part of their military planning. those are rational actors.
this new and dangerous stage our nation states developing the capability to cause political terrorism. i get back from the middle east in saudi arabia. a hacking a global plot. this is the english arab news. they were proud of the fact they were doing this. in the article, it says we will not describe the standing country. this is likely iran, who hit one of the major cash flows for the saudi kingdom and was devastating to this particular company. the level of sophistication was concerning. countries like iran have tried it here on our financial sector.
they were doing probing about what they could and could not do and what was possible. this is the new dangers some for cybersecurity. we can talk about loss of economic profit. this new level of political- sponsored terrorism is here. it is here today. if they are successful here, that is the catastrophic event that people talk about. getting into financial networks in closing them. denial of service that is so devastating, it is hard to recover from. in the last part of that, now is not just denial of service. look at what happened in the case against saudi's perto oil company. it manipulated, destroyed data in a way that made it almost impossible to unplug and rebuild
and plug it back in. that is dangerous. amounting showing up at your bank. they cannot tell you what you had. they do not know what you had. they have no way to recreate what you have. talk about chaos. it is here. we better do something about it. other than that, drinks are in the back of the room. [laughter] >> there are a lot of questions that a lot of us would play in on. one that i hope we get into the conversation -- i have testified a lot. what they lack in intent -- in capability, they make up in intent. it has challenges for the department of homeland security. how do we get intelligence product? what can we learn that can be
shared with our critical infrastructure in the u.s.? that is an tee up for you, mr. mccaul. he cochaired the most prominent cyber study he did with t. it had a bill that passed the house but not senate. >> i want to thank my colleague for his great leadership. i looked forward to having a drink with you after this. the report is the most downloaded. many of those kids are coming from china and iran. and russia -- many of those kids are coming from china and iran and russia. this is fascinating. on september 12, 2001, we had a conference scheduled on terrorism and cybersecurity. richard clark was going to be
the speaker. we canceled that. since then, the cyber threat has increased exponentially. i from the cybersecurity caucus in the congress to educate members on this threat. there is a lot of education to do when you talk about legislation. it can be tricky. they had a glazed over with in their eyes. that was six years ago. members of congress are starting to understand the threat that mike played out. we need to do something about it. just about every federal agency has been hacked into. they continue to do that daily. i imagine in the physical world if papers were stolen out of the pentagon. it would be on the front page of the washington post.
those attempts are made daily. they have stolen military secrets. ource.open s i see it on three levels. there is the crime, intellectual property theft. general alexander said $1 drug and has been stolen in intellectual property. there is the sba notch -- espionage. china and russia have stolen. why in meant when you can steal? -- why infant when you can still? -- invent when you can still carried the cyber warfare. it is intent on destroying. with the latest events we saw coming out of most likely iran, and down 30,000 facilities in
., di arabia and in the u.s we have a problem. it is a problem we need to fix. there are -- the white house has been working on an executive order. mike rogers shepherded through the intelligence bill which would allow the nsa to share the threat information with the private-sector to protect itself. the dhs component is to share information with the critical infrastructures. different information. on the committee i will chair, there was not enough buy in from stakeholders' on that legislation.
listen to the private sector and the critical infrastructure. i have heard from the high-tech community. they have been supportive. we want to get the buy in from stakeholders. i started on the speaker's tax force. our first action was to do no harm. there is a law of unintended consequences. we do not want to force relationships with industries in the private sector. we won a shared relationship. that will -- we want a shared relationship. that will be the theme as we go into the next congress to read every day, we fail to act we put more american lives at risk. osing, i do not blame the white house for acting because congress failed. the executive order can only do but so much.
the most important piece is what is called the safe harbor provision, providing liability protections for the private sector for them to share that information. that is something that only the congress can do. it cannot be done by executive orders. that is why it is so incompetent that we act. i want to think howard schmidt for his leadership. mike rogers has been a leader in congress on this. he did a magnificent job getting that bill out of the house. we were disappointed the senate did not pass it. i sat down with the chairman on the senate of homeland security. maybe we can get on the same pace so we are not in two separate worlds. the only way to get this through is to work together. if we operate in separate worlds, it will not happen. the american people deserve better.
and for being here. so early in the morning. i look for to the discussion. >> you raise a very ket number of points. one issue that demands bipartisan support is this issue. the devil is in the details in terms of what that looks like. before bringing in the panelist, i like to have a comment. we had senator lieberman here to discuss his legacy on homeland security issues. he said his greatest disappointment in his career was not losing the elections and passin. it was not passing cybersecurity legislation. why couldn't we at least move on the things everyone agrees needs to be done? that is on the information
staring side. -- sharing site. i would move something. something is better than nothing. maybe not. it is only sticks. it does not have carrots. you cannot expect the power -- private sector teammates -- raise their b bar so high. are there impediments that need to be modified to existing laws that cannot be promulgated by executive order? >> the executive order cannot cover that last but most important section of what we need. provide that legal liability protection for companies whose share price information with the government and vice versa. we have made progress in the senate. big revelatory bills had a
section in on cyber sharing. we had a consensus on the schreiber sharing peace -- cyber sharing peace. it allows the federal allows-- we are in the business of espionage to find out with bad guys are trying to do to the u.s. we take that information and apply it to our networks. would it be a good idea to take that information that we know is coming toward networks in the u.s. and share it with the private sector so they can protect the networks? it made sense to a lot of folks. it was bipartisan. it was a collaborative effort. the clash came when the senate bought into they have to have a
regulatory framework about how to protect the networks. to talk to the private sector. it is an unworkable even. they spend their time trying to comply with the rules of the federal government versus how to apply a threat information. i have not given on. we have a couple of weeks. an issue we have to do with in congress. [laughter] but a share information. -- led a share information. >> it is the most critical piece to any legislation we do in cyber. i introducedt came ou
applies. that was an attempt to protect and harden the federal networks . that would be important to ripple through of the private sector. that is more of the federal government. when it comes to protecting critical infrastructures, 90% is in the private sector. that is why this information is important.is an importaniece hopefully, we can find agreement to at least get this through with the liability protection attached. >> you chaired a study that looked at many of the same issues. analyst advocated congress act. can i ask -- where do you stand on expanding the defense
industrial base? should that be expanded to the critical infrastructure owner and operator is? does that need legislation to attack anyone with a relationship with the government classification.c we should try to open it up to those individuals. >> the share that. opening that up would be beneficial. i think dhs has to share more non classified information in a civilian role. >> your thoughts in terms of where things stand? >> the first sitting -- for
serving part of -- the conclusions are so unbelievably obvious. the nature of the threats are so extraordinary. you have to real back in some level of shock and you cannot find a way to get something as obvious as this through the congress. each person wants to protect what ever is they want to protect but we do not protect the country. i have thought about doing some series of national programs that just indicate what would happen and find some way to get this on the television networks the house or on newspapers, although not many people read newspapers , this is something that that is
everybody's day to day life. there has to be some kind of series of dramatic moments where it gets the attention of the american public and forces those people who for whatever reason what to try to block what is going on in the interest of much more narrow concerns because the entire country is at risk on levels we have not experience. this would be an enormous crash. it is going to take an incredible amount away from the next generation. this should be kept private. this kind of material is going to be used in competition. we have to find some dramatic way to get this threat made
understandable to a broader american people. there are systemic problems that prevent some of these problems. i have heard him speak several times. it takes three or four weeks before adding a good night's sleep again. he is right. he is not aged before i can get a good night's sleep again. he is right -- before i can get a good that sleep again. he is right. he is not making this stuff up. it is the only way i can think of helping out congress to do what they have to do. >> the latest james bond movie did have a big cyber component. one of the challenges is invisible. our dependency is so large.
>> if you could get a james bond character to star in a movie, and that would be fine. >> there is a privacy issue here that is so great not only from the government role but every individual data. you have seen this from the white house. you have been an advocate on these issues. to one extent or another, this has made astrology look respectable. where do we see things going? how can you get action? if you were in that white house job could you be moving on the executive order or find a way to work with the congress do look
at it from an? executive branch an -- from an executive branch perspective? >> the leadership you have shown has made this more attainable. i do not think i've seen anything. we have been looking at this since 1997 when they did this for protection. in 2013 when tom ridge nine release this in cyberspace. they have been working at this. dvina we are going to get something. we're probably going to get some of the executive orders. it is being very deliberate and coordinating with stakeholders in a private sector which is
critical. when we talk about where we are, i have heard people say market forces have not worked out, we need to regulate. they do not some of the things they should be doing. it they also do not understand exactly how do we take something belts in an insecure environment. you cannot rip out everything and replace it. when you look at the executive order taking care of some of the things were the executive branch can do a better job, they can do a better job on implementing some of the standards and working with a private sector
will be critical. in the next section, that even with the cop is, if there is going to be some education and training to take place. the stew and their colleagues have the experience to get these folks in a room and say -- is going to take their colleagues to have the experience to get these folks in a room and say we need to do something. they are on ish going to be key to this. it is going to be successful. it is calling to be successful from the american people. that is what you are all about. >> looking at it from a defense contractor who is engaged in a lot of these initiatives, where
do you see things going? what keeps you up at night? how much of this is policy abou? should we start imbedding security requirements in the design of our weapons systems and the design of our critical infrastructure systems whether it is acquisitions or other initiatives? >> that is a good question. you talk a lot about cyber security. i am happy to represent my aerospace partners. we do share information all the time. that is just the start. we know what is going on. we protect ourselves. we need to share information in order to survive. this is one of those few situations with the defense
contractors of its together and realize it is a game we have to play together. in order to do that we share information freely. we talk a lot. we share information digitally. that keeps us all protected. the scope is not big enough. that is a small part of the critical infrastructure. to stretch that out to the other areas i think is going to go beyond information sharing. we are doing something with the information we share. we're protecting ourselves. a lot of companies that had the information about the threat they might go that is scary. what do i do? i think you go beyond the technology and into more of the art associated with the science. >> one of the concerns i h had concerns iacks or when the
concerns i had -- when the can --- one of the concerns i had is ck or hackers are the same. it is not only public attention but it is doing so in a way that mary's of the science so it is accurate and we do not mix and match appeared the most sophisticated will not necessarily take down systems. they are in espionage. if their intent is to attack, if they can exploit they can attack. it is hard to convey that anyway that demonstrates.
countries are mostly engaged in computer network s&p not. others will start indicating more proactively is are demonstrating that as part of their military war fighting. information sharing, there is a lot i think we can learn from the challenges both good and bad. there have been tons of resources that have been applied to this issue. the real takeaways, one is the information sharing is absolutely necessary. two, there was some need in changes of articles.
i think you have similar challenges andin cyber. is there application with respect to cyber? what are the less positive lessons we ought to learn and not remake as we looked at it? >> this is a great panel. thank you for joining us together. the 9/11 commission highlighted information system as the government system. they put out similar reports looking at the intersection of national security, privacy, how to bring those together. coming out of that we have done a good job over the last 10 years. there is a lot more work to do.
this is definitely a journey. a lot of folks highlight it the successes on information sharing. these agencies have brought other lessons to bear like how to bring together government solutions. i call a neighborhood watch for the nation. is the first time in our nation's history several thousand front-line officers have trained on behavior's. it has been operational eyes. the strategic control, local control.
we pioneered information standards. we classified connectivity to our state and local partners. this is an integral part of going forward. a particular one of the things that is clear, all the time is the critical nature it faces. this is a phenomenal example of seeing this. when you talk about the second part of your question about lessons learned and the challenges going forward, we need to make sure we do not take a fragmented approach. there is the need to look at streamline and according
d integrating approach. had we look at that? there are lots of moving parts. we need to look at an opportunity to consolidate, do more information sharing to put in place structures that allow for a more agile and information sharing. >> yanase this as a federal government? >> the vast majority of law enforcement are state and local.
it needs to be centered. >> this has legal implications but also has policy implications. the private sector is the owner and operator. the way we treat cyber right now is very reactive. after an entity get broken into they tend to get a pat to try to stop now where from coming in. it is liked by calling -- it is like calling after your house has been robbed. do you have a responsibility to protect the employees or the customers at the bank? do we need to think about this in an active defense kind of way? you are rushing and blitzing the other team's quarterback but they are trying to score on you.
what should the private sector be doing and thinking? you had been a wonderful leader. one of the reasons, i am curious why you wanted to step into this role. i am a little more forward lean and probably most people would be in this. you do not just shoot back. you will take down innocent sites along the way. what about forensics evidence? could that be shared with other entities? i would be curious what everyone's thoughts are. >> thank you. i think this illustrates this will be a long national dialogue. they want to play a key and critical role in that dialogue. this is why i stepped up to
chair the external committee for the cyber security initiative. i would like to think our president for their leadership. i think the issues here, there are a paradigm shifting issues. i spent my career on the hill and government -- in government. in 40 years in the private government sector, i do not think i have ever seen anything as paradigm shifting as this. although everybody on this panel is actively involved with it, it involves the title 10, its title 50 issues, if the tension between the nsa, dhs function. the tension between privacy and
law enforcement. then the tension between an offense apart. these are issues that cross every sector of public policy, technology, international, the university uniquely can play a unique role in a discussion of these issues. a neutral forum trying to find solutions. in an academic environment, one of the leading institutions, can discuss these issues openly in a bipartisan way trying to find solutions. the external committee of the cyber security initiative, which i have the initiative to chair, you're looking at some of the initiatives of my committee.
this is clearly one of the largest companies focus on this issue. marc zuckerman with his background. howard smith. we have jim lewis you get up cyber security. we hand and in major number of ones that will be joining this panel -- we have a number that will be joining this panel. we will continue to have many of these discussions focusing not only on policy but on technology and research development as well. >> do you have some thoughts on that? >> i think the intelligence bill can speak to this. you have a threat.
someone is going to break into your house. here is how you can prevent them from breaking in. getting back to the prior question about offensive and defensive capability, if that is a very good point to make. the dod has had tremendous capability. we wanted to stay that way. in the wrong hands that could be devastating. many held hearings five years ago we found the left hand was not talking to the right hand. since that time i think the good news is that there has been a greater exchange of information and programs wear dhs -- where dhs and nsa can learn from each
other and build the excerpts at c -- expertise necessary. they're going to be vulnerable to an attack. an attack to take money. how are we going to stop that? let's look at sandy. the damage done by sandy, $60 billion. a cyber attacks on the power grid in the energy sector could do that. that is to the tune of $50 billion if not more. imagine the entire northeast been shut down with no power. it takes you back to primitive times. that is why these issues are so serious. the legislation is so important because we want the information given to the private sector so they can protect themselves in
advance. >> any thoughts on the active defense? i think we should have the conversation on cyber. we have not clearly articulated this tragedy. we will never fire wall our way out of this. the initiative remains with the attacker. the rest of the world knew what our capability was. what good is having a doomsday machine that no one else got it? that is the idea. on the active defense, any thought there? >> we have spent a lot of time debating this. america would be proud, we have
spent wrestling what could be a very difficult issue if we do not get it right. on at the defense there are really to quotients. the united states government making the decision that it is in to go and disrupt activity to for been something that from happening to us. this is good. our ability to trace exactly who the perpetrator was was not enough. it has gotten better and better. you have to be incredibly accurate. you do not want to disrupt the wrong place for someone who did not perpetrate the crime against the united states coronations act. that is where we did a long and
hard about how we do that. here is my concern. it is best not to go punch your neighbor in the face before you hit the weight room. and so we have figured out how we defend ourselves, i would be very very cautious about using an offensive capability in the united states. he cannot build a good defense without capability. i agree with that strategy. i am concerned about engaging that before we would have the ability to defend ourselves. something is coming back. on the private sector this concerns me a lot. you have a multitude of players in the space. you are not exactly sure you will have different levels of capability to determine who perpetrated the events. i guarantee you there will be
lot of mistakes made given the mistakerange. this is the sa way in america. you do not want vigilante justice. i cannot blame them. if we cannot get this framework right, you have an obligation to protect your networks. i get very concerned about and unleash private sector. >> you wanted to jump in there. >> one thing we grappled with was the issue of what constitutes an act of warfare? it is very difficult to determine that. even when you get to the source you have to have good intelligence on behalf of the
nation attack. i do think he could argue that day has already happened. it is coming. it will come. what is going to be our response to that? there was a director that basically said that its cyber attacks can be used against the nation perpetrator along with genetic -- kinetic ones. >> do you want to jump in? >> i would. it comes down to communicating this issue. you know more than i and anyone in this room. how do we communicate these issues with out suggesting the sky is falling?
bad weather for sure. it is not a question about whether your information will be ready. it is a matter who was going to read it. everything is vulnerable. the ability to convey the nature of the threats is still to be developed. we have not really communicated. this is one kind of assembly. a lot of people understand there is something other than local hackers at work here. there has to be some thought of how you will dramatize this. there will be some gray areas. at the defense is working. in active defense is also a problem. in many ways that is where we are. this could compound in ways we are just at the beginning of experiencing casualty's that are
going to happen. people have to understand that. it always seems on some level of the issue is an invasion of privacy or some civil-rights. it is a basic issue of the self- defense of this country. >> i am glad you brought that up. they say you open your door to something else. when we start looking at what we're up against, we have to focus on the fact that we have tremendous vulnerabilities that can be dealt with. proactively we can put those could cyber things for government to do it. the private sector can do it.
it is so critical to help them reduce those vulnerabilities and make sure if and when an active defense is necessary if is very well defined in very narrow and specific in the scope of it. when we start looking at what we do, every country in the world that has some capabilities are looking to see what we're going to do. when we talk about active defense, and you look at some of the report as a 77% of hackers are in the us, i do not know what other country saying it is in their best interest because it is a server in kansas city. there are all these complexities. we have to be very cautious in
this clear and try to correlate them in today's world. there is one talking about use of fire. it is ok to use fire in the conflict against an enemy if some conditions exist. the wind is not blowing back at you. the second thing is that you have nothing that is flammable. if you do have something flammable, it is of no consequence. if you look at the world we are in today, if we start using those are the things, it does not take much to turn them around. we are tremendously vulnerable.
we need to work on reducing the vulnerability so they can do something more than send a piece amal where of -- byof malwa re. >> that is very provocative and thoughtful there. >> with regard to this whole issue of attribution, we're talking about an act of defense. it that the question that human intelligence can display a much more a significant role together with our technology capabilities in terms of attribution? do we really have that linkage in place today? >> yes. >> ok. not me just say this.
we suffered a huge shortage in the 1990's. they thought we could pull away from our human intelligence capability, having people we recruit overseas to figure out what the bad guys are up to. we dwindle that capability that was very dangerous for the country. we felt we could do everything through technology. we were quite superior to any other nation. that framework has changed dramatically. other nations are ramping up in a way that is unprecedented. that human intelligence components is exactly right. in order to crack some of these systems, you need to have human intelligence enable met for us to be successful. as i have been chairman, we have made a significant effort to try to rebuild that human
capability. and a range are targets set so tohave the right placement be more successful in our intelligence. >> in terms of active defense, i think i'm going to take a shot. this is exactly rocket science. i am a rocket scientist. i felt qualified to make that. speaking to three things. you can do packed defense, active defense an attack operations.
attack operations mean i know where they are based in where they will be firing at. i know how far they can fly. i'm going to go out and attack them first. active defense means they have launched a missile. i'm going to go shoot it down. yelling atfense means tha everyone behind. in the active defense, we need to move it forward. make sure that we can take advantage. >> i agree with one exception. the active defense folks are talking about i know that they have a missile. beforeng to attack them they wake up in the morning and even have a thought for using its. that is the portion we have to
be incredibly careful about. i am with you when it is under way. that is why we thought sharing in real time to let people protect their networks. we know they have the capability to do it. did your foxhole deeper. the difference is that i know they have the capability to do something. and think and going to go over there in attack them first. that is where -- i think i'm going to go over there and attack them first. >> the term is used liberally. there is a difference between collecting information and forensics and someone who broke into your system. if i set up a site -- a honeypot is you are luring with honey. it may attract actorhackers.
put away wereg to may be back -- where they are pointing back to who the perpetrator is, that is not shooting back. it is providing a forensics trail. it is a began of information. one thing i do want to bring up. there is suppressive fire. one of the best way to maintain maneuverability is to suppress it. many of the counter terrorism issues, it is under government spaces. that is where others have othefe
enemy to spend less time plotting attacks and more time looking over their shoulders. maybe there is a survivor of equivalent. it is not active. it is defensive. it is looking at ways you can provide suppressive fire. i want to make sure we have an opportunity to bring in the audience. we have about 15 minutes. please identify yourself. we will start with suzanne. if the the please identify yourself. i might note suzanne is that the department of common security overseeing a lot of work and is a long time difference. >> thank you.
i would be remiss if i did not think both members of congress for a leadership. i am struck by both the strong consensus about how serious this threat is and how important information sharing is with appropriate safeguards for protecting privacy and civil liberties. i am wondering if the panel really believes that is enough. juxtapose those things. the seriousness of the threat and our responses. they have the incentive to do this. to any view the there might be, is this entirely coincidental
with the interest of government and the nation? if there is some delta where return on investment or an individual company may not quite capture the level of investment in our national interest in the area of control systems, isn't that an area where government needs to intervene perhaps live not prescriptions but perhaps with performance space standards? >> first of all, thanks for staying nice about members of congress. we do not hear that often. this is that million dollar question. i do believe market forces have not been unleashed on the problem. when we have the first public
hearing where we identify china as the major perpetrator of cyber espionage in the united states, the reason it took a committee like ours as much time to finally say that was because companies were so afraid that it would impact about their ability to raise capital, their shareholders, their brand name, and they're standing on wall street. all of those market forces. now that we have changed the debate and it is much more a public debate in companies are willing to say i am having this problem, i believe the market forces will force the company to take some standing. we've got to fix this upstream. we have big providers.
having access to this classified information. i do believe this will work. my fear with this notion is if i mandate to you what the standards are, and guaranteed by the time we get it done the standards will be antiquated. -- i guarantee by the time we get it done the standards will be antiquated. you hear about a new one every 20 minutes. i am almost tired of reading the things. the government cannot change that quickly. it is a long process. i argue got to empower the private sector to help secure their networks. there is some real talent out there.
if we can share back to the government it helps us. i happen to be overs you may want to apply the network. if it is a failure you have to look at maybe a set of standards from the federal government. >> we put a lot of time and talent into this. it is a threat. i do think the incentives to the private sector in terms of liability protections, safe harbor, things we need to do first, i think having best practices is a good idea.
the executive order does not put a lot of prescription. i talked to a lot of people in the private sector. it is a delicate balance. there's a lot of resistance from the private sector. as i mentioned, it should be more of a relationship not a forced relationship. if the forces, i believe pragmatically it will blow back on us. let's try this first. it is the point where you have to do something more, let's talk about that. the first step is to try the incentive route, at the sharing
of the information that can protect the infrastructures in the american people. politically speaking, i do not think you're going to get something like that. you're not be able to get that through the house. that is the way things are. >> we have got a lot of questions. and forcefully we are going to get to two more. -- unfortunately, we're only going to get to two more. >> a couple of things. it uses the power to say you better start writing better software. the other thing we can do is start looking at the insurance world.
we have the information security place in place. these are the things we could do that basically provide the private sector with here are some of the tools that the government has. here are some in the things you are required with the service. you need to have a cyber security plan in place if you want to be my business partner. let's try this. let's keep the dialogue going. >> this induces changers in behavior more than anything else does. it has not happened yet. there are lessons. >> i'm a senior fellow.
we understood their doctoral. i have very clear objectives and i could get this information i knew how i fit apply to defeat that. this is a fundamental change in that. what we see now is other states in developing this capability. it will be much more impact fall in a negative way to the united states if they can figure it out. we do have a national doctor. what you're talking about here is bringing american with them. your time of the drills underneath a desk. i'm not sure what that would do. made us feel better. that helped bring america with the. capability wise we do have a national tragedy.
this is fundamentally different. we have got to get america with us. i spent almost 18 months with privacy groups in the executive branch trying to do a 13 page bill. we still have a hard time. we conceded a lot of ground. without that buy in from the american people to understand what the threat is and why we're doing what we're doing, that is why i think our frustration about the lack of progress so that we can now have a national dialogue on what we already have.
>> i am the chairman of the computer science department. my question is talking about the role of the government and in the private sector and how they should be integrated together. i like to hear your insights. >> i was on an advisory task force on cyprus bills this summer. major recommendations are that we need to do a lot more to educate our folks about how to perform in cyber security. there is a cyber security that we can follow. this is not going away. it is not solely about defending
every platform. we have to train our citizens and students. academia has a strong will to go out there and lean forward. >> is what the program is about. there is a publication caring all aspects of this issue. it is about the work force. is more research and development. it is about bringing together policymakers like we have on the stage here, technology leaders here in a neutral academic environment. there is a paradigm change.
i think doing this on an academic institution campus. >> one of the things i hear from my partners is building capacity. there is a need for more and more folks that are cyber security trained. they can come into the workforce. clearly academia has a big role in that. there is a real need to accelerate the cycle of identify best practices. there is the whole gamut of things. these kind of public/private partnerships were there is a robust dialogue.
>> academia is critical in providing a skilled work force. there is some grit money for a federal work force. -- grant money for a federal work force. in response to the prior question, the genie is out of the ball will. -- bottle. the proliferation on cyber is occurring. there is no easy answer to this. there is no easy solution. an attack could be launched from anywhere in the world anonymously. finding out to lunch that attack is very difficult. we are entering into a new age of warfare that i think is going
to be very different from the cold war where we had mutually assured discretion. here you do not have the concept. we are in a new phase and a new challenge. >> the weapons are in the hands of just about anyone. >> he did have a mutually assured deterrence. we do not have that. that is the other side of it. there has been this big push for information assurance training. these are great programs to fit into an i.t. shop but they believe they are experts when they are done. the challenge is to present a program that is applicable to the skill set you
need. i have seen this misfire were people show up and say i have this degree therefore i am a cyber security expert. the complication is so much different than information insurance. it is an important role. it is not cyber security. the challenge for academia's to make sure people understand where they fit into the security and what those differences are. we are talking about millions of light of milk -- lines of malicious code of that spread when they get into your network. that is much more of a difficult task than your information insurance. >> i think there's something
like 100 + committees in the congress that are involved. there really should be a consolidation of them. i think there has to be seen some source were the maximum authority of the government is expressed in clear terms to get it out. i do agree with what he said. you have to get the american people to understand and support. it is out there. it is not in terms of people grabbing onto a large scale. it really has to be thought out. you cannot do it if you have every second committee issue a public statement. >> can congress create a committee to arrange the committee? [laughter] >> i failed at my job. i took us over the time i have
promised. we could go on forever. one of the things i was hoping he would make at the end, you raise this just before. when looking at cyber issues it is very multi-interdisciplinary. it has to be crosscuting. it has a hard science component. a management components. ultimately a leadership and training component. one of the things i've been would be helpful would be to look at it almost as if you are in an architect. we have not architect did this out other than the boxes. architecture is about design. -- gewrew up like whit rew up like wild weeds.
i think maybe getting some architects who do not consider themselves part of it will be a step in the right direction. there is so much to discuss here. i do want to leave all of our speakers with a token both figuratively and literally of our appreciation. i am so happy we have two chairman driving these issues in congress. thank you for your leadership. i am delighted at all of the leadership. this is a priority. we have some of the best trying to galvanize and move around this issue. i want to say thank you to our panelists and commentators. thank you. [applause]
[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] i'm glad i live look at the u.s. capitol where the flag is at half mast in remembrance of the school shootings. 27 are dead including 20 children. earlier today, president obama delivered a statement on the tragedy. here is a look. >> this afternoon i spoke with governor malloy and the fbi muller. made it clear he will have every single resource he needs to investigate this heinous crime. we endured too many of these in
teachers, men and women who devoted their lives to help our children at fulfill their dreams. our hearts are broken today for the parents, grandparents, sisters, and brothers of these children and for the families of the adults who were lost. our hearts are broken for the parents of the survivors as well. they know their children's innocence has been a torn away from them too early. as a country, we have been through this too many times. these neighborhoods are our neighborhoods, these children are our children.
we will have to come together and take meaningful action to prevent more tragedies like this, regardless of the politics. this evening, michelle and i will do what every parent in america will do. hug our children a little tighter and we will tell them we love them and will remind each other how deeply we love one another. there are families in connecticut that cannot do that tonight. they need all of us right now. the community needs to be an arabesque as americans and i will do everything in my power -- the community needs us to do our best as americans and i will do everything in my power. all of us can extend a hand for those in need. to remind them we are there for them, we are praying for them,
the love they felt for those they lost in doris notches in the memories, but also in hours. --endures not just in the memories, but also in ours. heal the broken hearted and bind up their wounds. >> you can see the president's comments again tonight in one hour. next, a look of the ongoing negotiations over the fiscal cliff and a formula for paying doctors under medicare. we will hear about what it is, what it costs, and what could happen to medicare if no agreement is reached. this is an hour. host: we want to welcome sarah kliff, a health care reporter with "the washington post."
what we have seen every year is congress passed a temporary pay patch to make up the difference. every year, we get to the end of the year and there is this impending gap. right now if we do not pass it, medicare salaries will go down by 25%. everyone thinks the doc fix is not a good idea and we should fix it permanently. it is something that we face every year.
host: if nothing happens next year, the cost is estimated to be $25 billion. over two years, $41 billion. guest: it is expensive and we always have to find a way to pay for it. we are looking for some other cuts that we can make to total those amounts. the price tag goes up to $244 billion for the next decade. host: what does it mean if you are a doctor accepting medicare patients? guest: every year this becomes a debate. i think a lot of doctors assume it is going to get fixed so you usually do not see doctors at the end of the year say i am not going to receive patients. many would say i am not going to take that pay cut.
we have not seen that phenomenon play out because every year washington has come through with stabilizing their paychecks. host: they have come through with sgr. what is that and what is the formula? guest: it is the formula that congress created back in 1997, the one that they thought would determine how much doctors got paid. it is a pretty tricky business to try to figure out how much our medical costs are going to grow. it worked for about five years. than the cost of health care outpaced the formula. it proved not to be sustainable at all. each year we have had to shore up the formula.
host: how did this come about? guest: it was back in 2002 was the first time when the sustainable growth rate was too small, where doctors had to take a pay cut that year. so they passed the first pay patch. that has grown every year since and has become a bigger budget item. host: let me take this from two sides. how is washington preparing for this? guest: usually there is a lot of talk about the doc fix at the end of the year. it is just one of many issues facing congress. even though it has become bigger, you hear less about it right now because of all the other issues that are happening. you do see doctors on the hill lobbying on the issue wanting to make sure the pay cut does not go through and they want to make sure that revenues do not get cut in the process, that certain reimbursement levels are not being lost for them.
host: back in 2002, congress did not implement the doc fix. what led to their inaction years ago? guest: my understanding was the first year it happened, it was a smaller cut. we were not looking at the 26% cut at that point. it had been working for the past five years. i think that is why in 2003 you saw people saying we are not taking a cut again. host: if you are a physician, what should you prepare for? guest: there have been a few times where they have gone past the deadline by a few weeks and medicare has held off on processing claims.
they can usually do that for about a few weeks or so. if we are not able to get this fixed, you might be looking at some disruptions in your billing process. however they are able to pass a few months of funding, business should pretty much continue as normal. host: sarah kliff with "the washington post." our phone lines are open and you can also send us a tweet or an e-mail. iris joining us from virginia, the republican line, good morning. caller: good morning. i just feel like -- hello? host: go ahead. guest: the speaker that is speaking, sarah kliff, i beg to
differ with her because we have been without a doctor -- my husband is on medicare and i am still paying for an individual policy. we have been without a doctor since back in june and our group practice has told us they cannot get a doctor. the doctors that are coming out on the going into general practice or internal medicine because of the medicare situation, that they are going where they can make more money. we are still without a doctor. host: what are you doing? caller: they will give us a flu shot or whatever but as for having a doctor that new our routine and would be able to -- that we would feel comfortable with, we are waiting for one to have on staff. we go to the doctors in orange county.
it is a university of virginia practice out of charlottesville. we normally have always gone to those doctors, and they treat a lot of elderly. host: if you have a life situation, what do you do right now? caller: we have to see whoever is on staff there that is still there as far as any kind of situation. my husband just had shingles and he was being treated for that. they could not see us until two days later. they ended up telling us to go into the emergency room in charlottesville. host: thank you for the call. guest: i think that question speaks to a larger problem in our health care system right now where primary doctors and the services they provide are being paid less by medicare, medicaid, and private insurance companies.
it creates a bigger incentive for doctors to go into surgery with a can earn twice as much. that is a problem of how we reimburse all the doctors who are serving us. there is a bit of movement right now with insurance companies in the federal government making some changes to try to pay primary care providers more. host: let's take a step back and share with you some of the policies behind all this. a former speaker of the house spoke to reporters yesterday on the issue of medicare. [video clip] >> we are not throwing america's seniors over the cliff to get a tax cut for the wealthiest people of america.
we have clarity on that. host: sarah kliff? guest: the eligibility age quickly shaping up to be a big issue for the fiscal cliff. house republicans have said this is something they want to come out of these negotiations. congressional democrats, one of the top senators, has said we are not on board with it. it is difficult to see where that issue lands. what that will mean even chile is moving the age up to 67 -- will mean eventually is moving the age up to 67. host: the issue of spending, a large majority goes to these programs, medicare and medicaid, social security.
speaker boehner was speaking about that yesterday. >> i am not concerned about my job. i am concerned about doing the right thing for our kids and grandkids. if we do not fix this spending problem, their future is going to be rather bleak. host: this doc fix will cost potentially $25 billion. where is the debate heading? guest: it is heading into the holiday season as there seems to be an impasse between the two political parties. most expect to see changes or cuts. moving the eligibility age to age 67 is one of the big changes they have talked about and probably others that will come up in the next week or so.
host: here is a headline from your paper, "the washington post." saying that the problem for states, that revenues are decreasing while health care costs are skyrocketing. guest: medicaid has become a huge budget item. states are now spending more on medicaid, the program that covers low income americans, more on that program than education which is eating up a growing part of the state budget. a lot of folks in washington do not expect that to get cut. that goes to the fact they are trying to convince state to participate in the part of the health care law that would expand medicaid to everyone are earning less than $15,000 a year. they do not want to send the wrong message. however, that puts more pressure
on trying to find cuts for medicare. host: dealing with all this is year to year corrections or changes or adjustment. why not make some long-term adjustments to the so-called doc fix? guest: a lot of people in washington advocate for that. the problem is it is very expensive. it is a lot easier even though it is less stable and most folks in washington do not like it, it is easier to find $25 billion. host: our guest is sarah kliff from "the washington post." our next caller is linda joining us from florida. good morning. caller: good morning, steve. i love your show.
most of my education has come from the "washington journal." host: thanks, linda. caller: i am a health care provider and we do not need a doc fix. there are multiple health care providers in the united states. the ama lobby is the biggest lobby entity that is out there. they don't want nurse practitioners, physician assistants, and others in the field to be able to have a seat at the table with providing health care. every patient does not need to see a doctor. our system is greedy. our medicare system is so bad now because of physicians who do not want to share or who see themselves as the sole entity. there is so much overcharging from medical equipment and pharmaceutical companies.
their need to be something done. what happened to physicians making a meager same day living as their fellow man? this nation is -- we are just fallen apart from greed. nobody wants anyone else to have more than what they have. we need to be looking out for our neighbors. host: will that bend the curve of health care costs? caller: there is going to come a time when you will not even need to see a physician for hypertension or a nurse practitioner. once you know what the parameters are for high blood pressure, you can be treated by medication that can be prescribed and all of you will have to do is follow up.
we have to think out of the box. we are providers with the same education. a lot of news practitioners have taken the medical exam. the ama and the positions want to snuff you out. host: thank you for your call. guest: i think you speak to a big issue in the debate right now. something that we call scope of practice. i think that is going to become more of an issue in 2014 when the health care law starts adding millions of people to the health care system. nurse practitioners, their lobby here in washington has said he will need more of us to see all these patients.
we will see what happens with expanding our health care system to cover more people if health care professionals start playing a bigger role. host: what is the med pack plan? guest: it is a group that advises congress and makes recommendations on how to fix the medicare program. they have come up with recommendations to eliminate the doc fix. it is a plan that usually does not get much traction here in washington. host: here are some numbers that put this into perspective over the next nine years through 2021. the total cost would be about $200 billion. inflation through 2021, $350
billion. the simpson-bowles plan, about $250 billion. if you freeze payments through 2021, in excess of $300 billion. guest: these are all different plans that propose different savings for the medicare program. even if you are going to freeze payments, you have a lot of people coming into the program in the coming two decades. there is really no easy solution. there is no easy way to solve our spending problem. host: our next caller is roger joining us from illinois. good morning.
caller: people are not having a problem finding doctors or hospitals. i have to differ with that. i had to go through six doctors before i could find one that could take me because i was going on medicare. i was on the company plan for 40 years and they offered me a plan that really no doctors would except, including the new hospital here in town. host: what would your doctor -- what did your doctor say? caller: he would not accept the health care plan i went on. i had to go on to humana. notdoctor's office would
accept that any longer. i have to go to a hospital in the next town over. i've found a doctor over there and he is a good doctor but the reason is is because he accepts everybody basically. he is a good doctor. it is the next town over. they just won't accept it. i went through six doctors including my own previous doctor. this notion that everybody will accept it, she was just wrong and i think maybe the people in washington just do not understand. their answer is we do not get paid. host: darrell says --
guest: i think what you are speaking to is the doc fix that we have right now. if you look at our work force, we do not have enough doctors to serve our population. we are going to be above 30,000 primary care physicians short of what we need to take care of our population. some of those gaps might be filled by nurse practitioners or physician assistants, but it is a challenge for medicare, private insurance, and the medicaid program which tends to pay doctors the least. what you see some doctors doing to make up the difference, something referred to as up- coding. it gets a higher reimbursement rate or invests in more
expensive technology. i think that is an issue that is recognized by many, that we really do need more health care professionals as baby boomers begin to age. host: on our twitter page, this is one viewer saying -- from california, good morning. caller: only 15 states have agreed to set up the exchanges. 24 states are not going to set them up. earlier this morning, they said there are only a couple taxes involved. there are 18 taxes hitting
mostly the middle class out of this health care plan and almost 1200 fees that are going to be levied against the middle class. our president is taking a 20- day vacation in hawaii to cost the taxpayers $4 million. he is just going to blame the republicans and let the taxes go up on everybody. host: grace says -- guest: medicare's costs have grown slower than the private insurance market. even though it is a big expense for the federal government, it would be even more expensive if we were growing at the same rate of private insurance. medicare has millions and
millions of patients and to negotiate much lower rates. on the flip side of that, the issues we talked about earlier about doctors not wanting to participate. medicare has a huge population so they are able to streamline a lot of the education costs. host: another comment on our twitter page -- guest: malpractice is an issue that came up in the health care debate but did not move for that much. it is one solution that might make doctors more comfortable in their practice, that they are now worried about getting sued all the time.
most of the estimates show it would be relatively small in the world of health care spending. it is something that comes up in the debate. host: as you well know, one of the fastest per cent of the growing population, baby boomers retiring, and the president's health care law, more people are requiring health care and more people in the health care system and yet doctors that will not satisfy the need. guest: a big challenge for the health care law is when you give people insurance, how do they get care? what is the obama administration has looked at it is a bigger focus on primary-care. they are running the program to fill some of the gaps we heard about this morning with there are not enough people.
the health care law increases reimbursement rates for medicaid doctors to encourage them to stick with the program. i think you're also going to see a lot of people who are positioned assistance and a nurse practitioners stepping up to play a bigger role as they have more and more patients. host: the next call is from jacksonville, florida. good morning. caller: good morning. i am concerned about medicaid. i was employed for years and was diagnosed with cancer. for a while, by insurance paid for it. the cobra was too expensive for me because i was drawing disability.
i was -- they told me i could not apply for medicare until 2014 which i did not understand. i am 58. then i had to apply for medicaid. medicaid has a care cost and not familiar with. -- care cost i am not familiar with. maybe $1,100, if you do not make that quota by the end of the month, you have to pay that total bill. when i talked to someone, i said -- my income is $1,200 something a month. how can my care cost be so high? she said it was not based on my income.
the doctor who i have, the primary care i had when i was on my insurance policy, they no longer take medicaid. my chemo doctor tells me that they accept medicaid but they have to get an ok from medicaid. guest: i think access to care is a big challenge for the medicaid program and will continue to be. it will expand about 17 million people over the next decade as the health care law takes effect. doctors who tend to get paid less than private insurance, they say are not even breaking even and cannot afford to see these patients. one thing the obama administration did was to raise primary care rates to meet those
of the medicare program. that is one thing that starts in january of this coming year, one thing that might address the problem. host: one of our viewers has this to say -- guest: it is hard to know what are the right prices. most research shows our prices are much higher than the rest of the country. a lot of that has to do with the fact that the united states is one of the few countries that does not have rate setting. so, it is left to the private market and to legislators and regulators here.
we have set the prices much higher than the rest of the world. host: how many will lose health care? guest: it is hard to say at this point. most parts of the expansion have not happened. most people will gain health insurance. it is getting at the issue of will health insurance be worthwhile. i think that is still an open question that we will see as the insurance system absorbs all these people. host: from stella -- do you have an estimate? guest: i do not know what it is. i know the costs have been rising but i would suggest if you look around at some sources, you will be able to find an answer.
host: richard is joining us from florida on the independent line. good morning. caller: good morning. what i am interested in is in three parts of our health care system. as americans, we have to knowledge or accept or choose the health care is a right in our country and not a privilege. i think that requires an agreement and has to be stated and communicated to everyone and we require leadership. secondly, we have to look at what we're willing to do to support people because a majority of the people, probably those 65 or older, demand will require the greatest amount of our health care dollars so we have to plan for that.
we have to understand that young people will not require as much and make a dedicated effort to plan for the costliest part of our population. then i think the third thing that we require is more participation of people, and not just requiring or putting us on our government. we have to demand answers and do our own research. we have to tune into more programs like "washington journal." host: richard, thank you. guest: the points you are raising are the points that we have had in this health care debate. we are moving to a system which will look at much closer like universal coverage where almost everyone is going to have access. but will also require people to purchase insurance which is a requirement that is the least popular in the health care law that went all the way to the
supreme court this year and was ultimately upheld. as we move toward a system that has almost everyone participating, it is going to require people to take a more active role in their health care. host: tim has this question on our twitter page -- guest: my understanding is there are some reimbursements. some of the biggest differences we know about is doctors tend to operate in different ways in different parts of the country. a lot of research has looked at variations of how much care costs in various types of the country, and they found huge differences in what it might cost to get a knee replacement
in one area versus another. they found that the spending does not aligned with the quality of care -- align with the quality of care. host: grace says -- guest: and a lot of the limits -- a bottleneck in our health care system comes from congress where medicare funds most of the presidency slots. -- residency slots. those are largely paid for by medicare, and there is a cap on how many medicare will pay for it to control the costs. it is seen as a big bottle neck which stems back to legislation that caps how many residency slots our governments will fund.
host: ben bernanke spoke to reporters earlier this week about the potential of what we could face if congress does not reach an agreement. no public meetings are scheduled on the fiscal cliff today. next, virginia on a republican line, good morning. caller: my question was on medicaid/medicare eligibility for non-residents. it seems like in the past, the united states became a retirement system for the whole world. a 65-year-old got medicaid, free nursing-home, state buy-ins to assist. i know they changed the length
of time required for non- residents to qualify based on the immigration status, but are there any changes to the limit or help more people? do you know anything about that? guest: i do not know as much about that subject. i know it is a huge area of debate. what i do know and one thing that has been controversial is the health care law -- its subsidies will not be spent to a number of folks who qualify under the modified dream act that was passed by the president earlier this year. i don't know as much about immigration status and how that interacts with health care benefits. there could be some changes on the way.
host: this viewer saying -- guest: there is a big difference between the two. traditional medicare is the program that is run by the government. it is with the majority of beneficiaries with the government -- medicare advantage is when you work with a private plan that manages your medicare. medicare advantage is smaller than traditional medicare but enrollment has been increasing over the past decade. medicare advantage plans tend to get reimbursed more than the traditional public plan. host: will we ever see a permanent doc fix? guest: that is a great question
and i think something that a lot of people in washington would like to see. it seems very unlikely that we will find the $244 billion necessary to pull it off. they would need some other opportunity where this became a huge priority. host: arizona is when our next -- where our next caller is coming from. good morning. caller: good morning. i had to go on disability -- yeah, i'm here. host: we can hear your question. caller: i had to go on disability at an early age. [laughter]
host: i am going to move on. what are they facing in terms of going onto medicare or medicaid? guest: you are basing a lot of the issues affecting the general population. the various reimbursements that you get from the government -- and a lot of the issues that we have been talking about with the doc fix, strained medicaid budget, that is going to affect anyone in the program. host: this came up in terms of doctors charging a lot more. if you have been in the emergency room or a hospital, the prices today are itemized and there seems to be a lot of inflation. guest: there are a few factors driving up health care costs. some of it is technology where
we have all these new fancy items. doctors -- if a hospital down the street has a fancy, new machine, then i have to have that, too. a lot of the rising costs and technology are driving this increase in costs. you look at the past few years of health care spending, the actual volume of health care has either gone down a little bit or has remained constant where people are going to the doctor a lot more. the prices are growing faster than the rate of inflation, and we are seeing some of that driven largely by technology. that is coming on the market. the obama administration is taking some steps. there is the accountable care organizations.
the idea is to move away from a we have right now where doctors get a set amount for each service they provide. these organizations move to pay people for quality instead of quantity. the obama administration will give a hospital a set amount of money for caring for the patients. then the doctor has to strategize so they don't have to go into the red. they are hoping the model will drive down costs and get rid of the incentive or just that -- we're at the start of that program. host: brian from massachusetts with sarah kliff.
caller: a caller talked about marriage practitioners and there is a lot of them. they pretty much have a lot of schools are graduating many nurse practitioners and physician's assistants. there is a cap on the amount of doctors they can create. nurse practitioners have two years of crammed education. i think they are good providers. we cannot assume that a nurse practitioner or physician's assistant are going to be as good as medical doctors.
guest: that is a criticism that a lot of people raise. are these people going to be as good as doctors? in certain spaces, they provide justice high-quality of care as doctors. a lot of people expect that nurse practitioners provide basic functions of madison, things that been done in a standardized way. doctors have more training. host: this goes into the overall debate in terms of the doc fix. the national debt was in excess of $16.3 trillion. guest: health care is a huge part of it. it is pretty much our health care programs and i think that is why we are debating that in washington and that those programs are a huge part of the conversation.
host: democrats are saying it is off the table. guest: there are other changes they might be ok with. means testing in medicare which results in those who earn more pay more for their medicare premium. that is one proposal that democrats have begun more comfortable with. there are other changes they might be more comfortable with. host: ron has this suggestion from our twitter page. guest: that is a term we heard. when the cut health care, someone will be bearing the brunt of that cut.
that is similar to the concept of those care organizations. they also include quality metrics as part of the contract, where they look at people's outcomes. one way to prevent against the u.s. skimping on care. host: this from sasha -- guest: that is one proposal that gets floated by democrats. medicare part d bargains for drugs.
i do not know -- i do not think it would be a cure all, the one proposal that would fix everything. democrats think it would reduce the cost of medicare. host: is there a plan b? guest: we have seen them as the january 1 deadline before and get 30-day extensions. at some point they were working without an extension. medicare told doctors to hold off on submitting your claims for a little bit. that is a situation we have ended up in before. if we're talking months, we're talking about big pay cuts for medicare doctors.
that would be uncharted territory. host: joe from arizona on the republican line. caller: good morning. if we look at it logically, sarah is on the right track. we have become a society with honesty as a technicality. you can get more money but you break the law. our society -- you need to stop your people on the show, politicians and say, i asked you a question and you didn't answer it. this is why the doctors in medicare can get away with it.
grover norquist was on the other day. this guy is affecting the whole country. let's be logical and real. you're cheating the system. honestly with a technicality has to stop the way walter cronkite used to do it. "i asked you a question and that wasn't the answer." stand up to people. "we're the first line of defense." i applied all of you for as much as you try. you have to hold their feet to the fire. i'm so sick of the split amongst this country. hold them to the fire.
host: thank you for the call. we try to do that. keep calling in and sending those tweets and e-mails and keep us on our toes. guest: why isn't anyone doing anything? health and human services runt fraud prevention and fraud detection. that has been ramped up by the affordable care act to target those people. the government estimates they have recovered about $4.1 billion in medicare fraud. host: this is from one of our viewers.
guest: that is the hope from the obama administration. reimbursements cannot keep going up and up and up. health care is about a fifth of the entire economy. if you give people a budget to work in, they will change the way they work. they have to figure out a new way to do business. host: cedric from texas, good morning. welcome to the program.
caller: i'm a physician and i follow your journalism. i'm probably one of the few physicians that agrees with -- i want to eliminate all government plans. i would be willing to take nothing. i believe the only way to fix this is by setting up a free market. prices meet demand. none of these things meet the demands of the people. with regards to seniors, they talk about how much insurance companies are taking.
when they convert from a plan to medicare and how there are hoops. they are lifestyle decisions. president obama is trying to give bundled payments for health care results. a large portion of the population knows they are supposed to eat well and not to smoke. they need their hips replaced the day they turn 65. they know what they need to do. it is not something simple like putting through a scanner and
getting the answer right away. they are not interested. you end up living a long, healthy life. you can still get everything at the expense and burden of the younger generations. i've been a physician for 10 years. i just turned 40. i'm not the primary care physician. i'm an anesthesiologist. host: we will get a response. guest: that is an important point. lifestyle decisions are driving spending. the health-care law allows
employers to vary their premiums. by taking a smoking cessation class or going to a primary-care doctor like you should be? there is only so much that a health plan can do to affect the lifestyle choices that its members are making. you do see some investment in the health care law. host: janet on the republican line. caller: good morning. i am in massachusetts which is probably the future of where we are going as a nation. the health-care part has grown to over half of the budget. i took a look at my personal situation.
my health insurance costs were taking up 25% of my income. i read to the policies. poor and low-income people are being required to pay a premium. when when you look at the services they get, what they are required to pay for is air. there is no benefit there. these programs are taking money from the poor and keeping it. called around to the practices in my county. i found that if you were on any of the subsidized programs, you were told that the primary care physicians books from booking initial intake annual physicals
were all booked up for the next year and that's the next three months of appointment books would open up and call back then. guest: these are interesting points you raised about massachusetts. massachusetts was the model for national health care law. they have the top medical institutions in the country, places like harvard and massachusetts general. they have the highest insurance premiums in the nation. increasing insurance coverage, and they have done that. 98% of the residents are insured. host: will this be resolved before january 1? before january 1?